In the next couple of months, major Wall Street brokers may be giving Wells Fargo Advisors a closer look. Long the laggard in recruiting bonuses among its wirehouse rivals, Wells hiked its offering for $1 million producers to 295 percent of trailing 12 months production, from 195 percent two weeks ago, several recruiters and branch managers told Registered Rep. magazine. The deal will last only through Dec. 17.
The move gets the Wells’ offering closer to those of the other major Wall Street wirehouses, which hover around 330 percent of trailing 12 months production. Wells executives have long said that they do not want to offer top dollar for every new recruit despite the bonus feeding frenzy among Wall Street retail brokerages. But 2010 has been a weak recruiting year for the firm, which continues to lose advisors on a net basis.
“Where they’re really missing the boat, and have, is that they haven’t been able to get the bigger guys because the deals are so low,” said Rick Peterson, a recruiter with Rick Peterson & Associates in Houston. “This tells me they’re going after the bigger guys.” Peterson says Wells Fargo Advisors is far more competitive when it comes to recruiting advisors in the $250,000 to $300,000 range.
One branch office manager said Wells Fargo Advisor’s recruiting numbers are off 80 percent in 2010 versus last year. “Recruiting is practically nonexistent,” said the branch office manager. “Because retention packages got paid at Merrill and Morgan Stanley Smith Barney, and the market is sideways. If you’ve got a brain you don’t jump right now.”
Total headcount at Wells Fargo was 12,125 at the end of the first quarter, down from 12,378 at the end of 2009 and 12,533 at the end of 2008, according to Cerulli Associates numbers. By comparison, Morgan Stanley Smith Barney gained 5 advisors on a net basis, putting their total at 17,405 in the first quarter, Cerulli data show. Merrill headcount was flat at 13,342 in the first quarter versus 2009.
“I think the other firms are having more success recruiting as well as having more advisors on 7-9 year signing deals,” wrote Cerulli analyst Scott Smith in an email. When Wells Fargo acquired Wachovia in late 2008, it decided against offering retention packages to reps.
Wells Fargo’s new recruiting deal includes 125 percent of on board gross (trailing 12 months production at the advisor’s prior firm) upfront, plus five backend bonuses of 25 percent each if certain growth goals are hit over a period of five years, recruiters and branch managers confirmed. (Prior to the change, the firm offered a smaller upfront bonus and just three backend bonuses.) In addition, the new bonus plan includes 20 percent to cover deferred compensation from the advisor’s prior firm and 25 percent for financial planning.
Wells’ New Recruiting Bonus:
125% up front of on-board gross (trailing 12 months production at prior firm)
1st year 25% bonus for 70% of on board gross
2nd year 25% bonus for 90% of on board gross
3rd year 25% bonus for 110% of on board gross
4th year 25% bonus for 125% of on board gross
5th year 25% bonus for 150% of on board gross
Plus up to 20% of on board gross to cover deferred comp
Plus 25% for advisors who do financial planning
“See I think those [growth hurdles] are very attainable,” said Peterson. “Brokers tell me they don’t think so because the market is so sideways. The toughest one is from the third to the fourth and fifth years. All the forecasts are that the market could be like this for seven to 10 years. It’s not going to go up significantly.”
The new bonuses are only for the best of the best: advisors with around $1 million in production, at least ten years of service at their prior firm, a book that is at least 30 percent managed money, a clean U4 and return on assets of at least 1 percent.
A Wells Fargo spokeswoman said that the firm does not comment on compensation, but that there hasn’t been any change to the firm’s “deal structure.” She added, “but we do have discussions all the time about what is the best way to recruit the best FAs in the industry. When we make these deals, we look at a bunch of things. We look at deposits, loan portfolio, account fees, fee-based assets, account fees, margin etc. All that stuff, to make an economic decision.”