Wells Fargo Advisors presented its 2024 incentive compensation plan to its advisor force Tuesday, and the plan remains largely unchanged from 2023. According to the presentation obtained by WealthManagement.com, the firm made no changes to its core cash grid, nor its 50% enhanced payout rate for growing advisors.
The firm did tweak slightly the formula for advisors to qualify for the enhanced payout rate, aligning it with growth in net asset flows. Advisors qualify if they generate annual revenue of $2 million or more, or an average $800,000 per FA in a team-sharing arrangement. They must also add either $150,000 in new revenue or $2 million in net asset flows to qualify on the first quarterly assessment, then only net asset flows on the other quarterly assessments. Previously, they were required to grow revenue by 10%, according to published reports.
Wells Fargo provided an example of how this would impact a growing advisor versus one with no growth. An advisor who does $1 million in trailing-12-months revenue in 2024 will receive $454,640 in cash and about $14,000 in deferred compensation, for an effective rate of nearly 47% payout. But an advisor who adds at least one $5 million account, two new loans totaling $2 million in balances and $500,000 in alternative transactions will generate $1.06 million in revenue and receive $530,000 in cash and about $46,000 in deferred. That’s about $107,000 more than the non-growing advisor and comes in at a 54% payout.
The wirehouse is making changes to its incentives on lending and deposits, including reducing the incentive for mortgage referrals from about 70-75 basis points to 35 basis points of the loan balance. Advisors will now get 20 basis points of net asset flows for lending or deposits totaling $2 to $10 million, and 50 basis points for lending or deposits of more than $10 million. The firm cited increased funding and capital costs for the adjustments.
The firm will also raise brokers’ expense allowances in 2024. Advisors with $550,000 in 2023 revenue will receive $1,250 for expenses, up from $800. Those with $1 million in revenue will get $9,000, up from $4,000, and advisors with $1.5 million or more in 2023 revenue will bank $15,000, up from $12,000.
The firm’s monthly hurdles remain unchanged, with brokers earning 22% of their monthly revenues up to $13,500, and 50% over that.