Wells Fargo financial advisors received their first paychecks last Friday under the firm’s new tax withholding system, which applies a flat rate of 25 percent to all. Many of the firm’s 12,000 financial advisors have grumbled to management about the switch, which will be in place until 2011 as the firm works to integrate legacy payroll systems from Wells Fargo and Wachovia.
On Wednesday, Wells Fargo Advisors announced it would offer a loan program with 3 percent interest to “eligible” advisors with cash flow problems.
Some estimate that 75 percent of the firm’s advisors will be impacted. For advisors producing over $1 million, the 25 percent rate falls well below their tax bracket, so they will have to pay a higher bill at tax time. For the average producer, generating $400,000 or less in annual revenue, it could mean a drop of up to $1,000 in monthly take home pay—a potentially big hit.
In addition, advisors who are eligible for tax credits won’t get them in 2010 and cannot get them refunded later either, says one disgruntled advisor who generates over $500,000 in annual production. He would have been eligible for $4,500 in tax credits in 2010. He estimates that preventing advisors from taking these non-refundable tax deductions could result in legal trouble for the firm.
“Either people are going to leave the firm, or they could potentially be looking at a class action lawsuit down the road,” he says. “Some individuals may be looking to change firms, because they just can’t afford to work here. People may start to realize in a couple of months, I can’t live off this cash. They may lose support staff or advisors strictly off of that.”
The disgruntled advisor says he is happy with the rest of the Wells Fargo compensation package. “They left the comp program alone. Benefits look good.”
Executives in the financial advisor compensation department recently responded in an email to some of the firm’s larger producers who had complained through the firm’s internal complaint/compliment system called “Excellence First,” saying that their hands were tied, according to one advisor. In the email the compensation department executives said that Wells Fargo Advisors fought the move but the people on the banking side gave them no choice. The bank is committed to fixing the problem by Jan. 1, 2011, however, the email’s authors wrote.
Wells Fargo was not immediately available to comment.
Wells Fargo Advisors FAs have not been particularly happy with management of late, as evidenced by the grades they gave the firm in our annual broker report cards.