Wells Fargo’s Broker Count Jumps after Long Decline, Wealth Profit Rises
Wells Fargo Advisors, the only one of the four “wirehouse” brokerage firms that is still actively recruiting experienced brokers, reported on Friday its first victory in reversing a nine-month tide of departures.
San Francisco-based Wells said that the advisory force that generates fees and commissions across its private client, independent contractor and private banking wealth businesses grew by a net 37 brokers during the third quarter to 14,564.
Though a mere fraction-of-a-percentage increase, the headcount gain is a symbolic victory as Wells’ parent tries to emerge from the shadows of the fake-account scandal that unfolded in September 2016 at its flagship consumer bank.
While its wealth and asset management businesses were not drawn into the scandal that has depleted profit in its core banking divisions, almost 350 brokers left Wells in the first six months of 2017 amid headlines about sales incentives and related scandals that continued to plague the bank over the past year.
Despite the recent recruiting gains, which included a $615,000-a-year producer from UBS in Spokane, Wells Fargo Advisors’ total headcount remains 3% lower than it was at the end of the third quarter of 2016.
“We feel good about the quality recruits in our pipeline,” a Wells Advisors spokeswoman wrote in an email. “We continue to invest in training models for attracting and mentoring new talent, while dedicating resources and support for experienced, high-quality advisors. It’s working for us.”
She declined to comment on the breakdown between new hires and trainee-program graduates.
Wells disclosed the headcount gains as part of its parent bank company’s third-quarter earnings report on Friday. The banking giant’s profit to $4.57 billion because of an unexpected $1 billion accrual to its litigation reserve related to a financial crisis-era mortgage investigation.
Its wealth and asset management division, which include Wells Fargo Advisors as well as Wells’ trust, private banking and investment management businesses, recorded a 4% jump in net income to $710 million from the third quarter of 2016.
Revenue at the division also rose 4% to a record $4.25 billion, driven by an increase in asset-based account fees and rising short-term interest rates that improved lending returns and net interest margin.
The wealth division contributed 19% of its parent company’s $21.9 billion in revenue in the third quarter.
Client assets in the wealth and investment management unit as a whole rose 8% from the year-earlier quarter to $1.9 trillion on higher market valuations and new asset flows. Retail brokerage assets rose 9% to $1.6 trillion, while advisory assets were up 14% to $522 billion.
Although broker-dealers have been pressing advisors to move customers to fee-based accounts, commission-based retail brokerage accounts made up 67% of total client assets at Wells Fargo Advisors as of the end of the quarter.
Brokerage account assets at Merrill Lynch’s wealth management business represented just 51.7% of customers’ investment accounts as of the end of the third quarter, down from 57.4% a year earlier, Bank of America said Friday in reporting its results.
The fake-account scandals that arose from what Wells bankers have characterized as a hyper-aggressive sales culture that emphasized production quotas and cross-selling among divisions appears to have affected the wealth unit.
Assets referred to the wealth division from Wells Fargo’s retail “community” bank declined in the quarter by 12% from this year’s second quarter, the bank company said. Since disclosure of the scandal, Wells has stopped reporting the average number of cross-sold bank products that its various divisions recorded per household. The wealth unit had outshone its rival retail banking and wholesale banking and trading divisions in the cross-sell metric.