Wells Fargo Advisors has joined the fray of brokerages offering zero-commission trades, announcing Tuesday that it began offering the pricing change to self-directed investors on its online trading platform, WellsTrade.
This change will have "zero impact on commissionable trades for full-service clients of our financial advisors—this is only for the do-it-yourself portion of the site,” said Joe Nadreau, head of Wells Fargo's independent brokerage and platform services.
Nadreau told WealthManagement.com that “with the announcements of our competitor firms it represents being in line with what the industry has laid out. With the industry going there, it makes sense for us to do the same.”
Charles Schwab set off a “price war” by announcing in October that it would offer zero-commission trades. Competitors like TD Ameritrade and E*Trade Financial quickly followed suit.
And while the elimination of fees will result in less revenue, Nadreau said for Wells Fargo, the decline will be minimal.
“We were already on the march toward very low trading conditions and the actual revenue that we collect related to equity and ETF trades online actually represents a fairly small single-digit percentage of our revenue," he said. “I think over time that percentage of our digital revenue associated with WellsTrade and Intuitive Investor (its robo), which we call digital and automated investing, probably started at some point in the 50% range of that revenue” but is now down to the single digits and continues to drop.
He said that unlike the discount brokerages, which make up for the shortfall with cash sweeps and the like, “most of our WellsTrade clients today are already clients of the bank and have broader relationships” than just trading.
Meanwhile, Wells Fargo is “doubling down on our financial planning business,” Nadreau said.
He said the bank has been offering advisors choice in the form of an independent RIA channel, which it set up earlier this year. Nadreau said the program, which is still in the pilot stage, gives advisors another option in how they want to run their business. The program will complete the year with a roster of 12 independent advisory firms, but Nadreau said Wells Fargo has plans to ramp up the program in 2020, adding another 26 to 30 practices and reaching the 50-practice range.
He said that the recently announced merger between Schwab and TD Ameritrade will “set the precedent for what RIAs are able to do. They have a lot more open architecture in the RIA platform and the ability to integrate with third-party providers, and that’s the kind of route we’re taking as well.”
He said that unlike Schwab and Fidelity, Wells Fargo “can bring to the RIA the breadth of service and product offering from Wells Fargo Bank, from remote deposit capture and banking and mortgage and lending products, none of which the other RIAs can deliver.”
The more Wells Fargo can give RIAs and their clients “open architecture” in products and services “while also giving them that breadth of product offering in the bank channel, that’s kind of where we see our sweet spot in the RIA space.”