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Wells Fargo Details Plan to Serve Independent RIAs

The independent financial advice channel has grown considerably over the past decade and "if you believe that is a trend, and not a fad, why would we not be doing this?" an executive said.

David Kowach, the president of Wells Fargo Advisors, stirred the wealth management industry in December when he said at a conference in Las Vegas that the company planned to launch a new service for independent advisory firms.

But the proclamation was not a knee-jerk reaction to the business unit's shrinking number of employee brokers, or out of character for its multichannel wealth management strategy, said John Peluso, head of First Clearing, the Wells Fargo & Company subsidiary that will now provide custody services to fee-only RIAs. For the first time since Kowach's announcement, the company shared details about the new business channel on Tuesday.

More advisors and clients are choosing the independent advice channel and their interest doesn't show signs of waning; It's the fastest-growing channel in wealth management, and Wells Fargo Advisors sees opportunity in it, according to Peluso.

“If you look at the last one, three, five and 10 years in the [independent] space … If you believe that [growth] is a trend and not a fad, why would we not be doing this?" Peluso said.

First Clearing and TradePMR, the introducing broker/dealer that will also provide middle-office support to independent RIAs that choose the new custodial service, have discussed partnering to serve independent RIAs on and off for eight years, Peluso told

Wells Fargo's move to serve more independent RIAs was "long overdue," according to Carolyn Armitage, managing director at Echelon Partners, a Los Angeles-based investment bank and consulting firm focused on wealth and investment managers. The custody business has more-favorable margins than wealth management and providing a landing place for brokers interested in starting their own RIA at least keeps their assets with Wells Fargo. The bank reported in its fourth-quarter earnings that Wells Fargo Advisors lost 4 percent, or roughly 550, financial advisors in 2018, bringing its year-end total to just under 14,000.

"If Wells Fargo can keep the custody [assets] and keep those fees, they’ve still won,” Armitage said. “I could see the other big banks following suit, too.” Although, the other so-called wirehouse brokerages haven't been so welcoming to the idea as Wells Fargo. Andy Sieg, the head of Merrill Lynch Wealth Management, recently told that his firm “has no intention of moving in that direction.”

Peluso rejected the notion the new service was simply a net to catch assets that might otherwise escape Wells Fargo entirely. “Our goal is to grow the company not just move people around internally,” he said, although he acknowledged that there will undoubtedly be Wells Fargo advisors who want to start their own RIA. 

But there won't likely be a glut of Wells Fargo advisors departing the wealth manager's employee channel for the latest service offering, Peluso said. Not every broker wants to go independent, let alone start their own RIA. Nor are they capable of doing so. The RIAs must also be fee-only and are required to have at least $100 million in assets and register with the Securities and Exchange Commission.

“I think it’s going to be a huge success,” said Robb Baldwin, CEO of TradePMR, which created a team specifically to help advisors establish and transition to their new RIA. Advisors in the program will have access to TradePMR’s advisor technology (Fusion) and to the Wells Fargo Advisors' SmartStation desktop technology, contact management systems and innovations such as the Envision planning process. However, Baldwin said RIAs will still be able to choose different third-party software and build their own technology stack if they want.

Longtime Wells Fargo advisor Carl Schultz was the first to start his own RIA using the new channel, Forefront Wealth Management, in January, and Peluso said he's in conversation with other advisors to make the transition as well.

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