Wells Fargo to Nudge Brokers to Get Bigger Clients 

Change is bank’s latest push to compete for clients who have millions of dollars in assets

Wells Fargo & Co. will push its brokers to work with bigger clients as part of a broader strategy to attract wealthier investors.

The bank’s St. Louis-based brokerage arm is offering bonuses to advisers next year if 75% of their clients have $250,000 or more in their accounts, according to a copy of the Wells Fargo Advisors 2016 compensation plan viewed by The Wall Street Journal. Wells Fargo will also encourage its brokers to offload clients with less than $65,000 in assets to trainees and other professionals, according to the document.

The change is Wells Fargo’s latest push to compete with Bank of America Corp.’s Merrill Lynch, Morgan Stanley and UBS Group AG for clients who have millions of dollars in assets. The company plans to keep its pay grid and incentive bonuses in place.

In other compensation news, UBS, like Morgan Stanley, isn’t making major changes to its compensation for 2016. The absence of sweeping changes at those firms is likely to please many advisers. By contrast, some Merrill brokers will see their base pay trimmed by 2% to 8% next year unless they increase the fees and commissions they generate.

Wells Fargo has been trying to boost its presence in the high-net-worth client segment without alienating its “mass affluent” base. Over the last two years, Wells Fargo created a formal partnership between its private bank,Abbott Downing, which caters to clients with $50 million or more and Wells Fargo Advisors.

Wells Fargo stepped up that affluent-investor strategy in October with a deal to exclusively recruit brokers from Credit Suisse Group AG’s U.S. private bank. The arrangement lets Credit Suisse U.S. brokers who are hired by Wells Fargo smoothly transition their practices and clients to Wells Fargo’s brokerage arm by early 2016.

Wells Fargo Advisors head Mary Mack said in November that the deal is expected to strengthen its presence in the ultrawealthy client arena in the eastern U.S.

Now, the firm has turned its attention to its roughly 11,000 brokers.

The new “small household” policy is optional for brokers. If they opt into the program, they agree to transition clients with less than $65,000 to so-called local financial relationship advisers, who are salaried and focus on serving existing clients.

Wells Fargo plans to pay brokers who transition these clients a percentage of the revenue generated, according to the compensation plan.

Advisers who don’t transition their smaller accounts will still receive a full payout—which could range from 22% to 50% of the total revenue an adviser generates—on those clients for the first 12 months. After that, advisers will receive a fixed 22% payout on those clients until their assets move above $65,000.

The payment for transitioning those clients and the bonus for higher-asset clients will be paid in the form of deferred compensation, the compensation plan says.

Wells Fargo brokers who serve a large number of small clients would be most affected by the changes, but the threshold and the firm’s approach is gentler than its peers. Merrill, for example, required brokers to comply with a small-household policy last year after instituting a $250,000 minimum account size on clients they could work with.

Since the financial crisis, the major brokerages have pushed their brokers to focus on attracting wealthier clients. Executives at those firms say such investors, especially those with $5 million or more in assets, tend to use more products within the brokerage, as well as needing the services of the broader institutions that own those firms, such as investment banking.

Source: WSJ – Wells Fargo to Nudge Brokers to Get Bigger Clients

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