Another Wells “Profit Formula” Team Leaves, Raising Questions About Unit
A recent move by a veteran team at Wells Fargo Advisors’ quasi-independent “Profit Formula” channel to a similar unit at Raymond James Financial is raising more questions about the whirlwind of compensation models offered to brokers today and about Wells’ commitment to so many choices.
Donald “DJ” McCullough, his father, John, and William “Bill” Sparks left Wells last month after more than 15 years of affiliating with Profit Formula to hook up with what Raymond James calls the Advisor Select independent division of its employee channel. The team, based in Kenosha, Wisconsin and St. Augustine, Florida, generated a combined $1.7 million in annual fees and commissions and had $220 million in client assets at Wells, Raymond James said on Thursday.
Both companies’ “hybrid” models offer that are higher than those for conventional broker employees but lower than the 80-to-90% payouts to contract-brokers at LPL Financial and other so-called independent broker-dealers. Brokers in the hybrid channels pay more of their overhead than traditional employees but also have access to certain health plan and retirement benefits offered to employees.
Wells has not been actively recruiting into the Profit Formula unit, which is a legacy of predecessor firms it acquired during the financial crisis of 2008, despite occasional hints from executives that it may revive that push. Instead, it focuses on building its conventional private client group of more than 10,000 brokers and its franchise of independent contractors known as the Financial Network, or FiNet.
According to Raymond James and its new crew, all signals from Wells is that ProfitFormula is gone.
“It sure seems like it’s not their favorite format,” DJ McCullough said when reached at his new office.
In December, Wells adjusted Profit Formula team payouts downward so that most advisors received payout cuts of 150-to-300 basis points if their team brought in less than $2 million of revenue. Though the McCullough group had been considering a move, Wells’s decision to apply the new standard retroactively to all 2015 compensation primed their resolve to move.
The team, who had been ProfitFormula brokers for some 15 years, spit deeper into their former employer’s eyes in a prepared statement. Raymond James is “a firm that was client-focused and advisor-centric, not run by a bank,” they said, adding that Raymond James’ technology and client reporting systems are “a big step up.”
In October, with $260 million of client assets and $2 million in annual production, quoting broker Tammy Sweet Halprin as saying: “It’s refreshing to see the personal touch and ownership shown by associates when it comes to resolving operational issues.”
A spokeswoman for Wells Fargo did not respond to a request for comment on the teams who moved and the outlook for Profit Formula.
To be sure, the McCulloughs considered moving to full independence at FiNet, but decided against it out of concern about losing benefits programs, said DJ McCullough.
Mark Albers, a recruiter and former complex manager at Morgan Stanley and Merrill Lynch, said Profit Formula continues to enjoy a strong reputation as a flexible option for brokers but does not believe Wells will spend resources promoting it.
“If they were having trouble making it make financial sense in the past, it probably doesn’t make sense now,” he said, referring to fee compression and the Department of Labor’s impending fiduciary standard rule.
The Profit Formula program originated at Richmond, Va,-based Wheat First Securities. That firm and its parent bank were absorbed into Wachovia Securities, which itself was purchased by Wells.