Wells Fargo Advisors (WFC) is keeping changes to its 2016 compensation to a minimum. It is, however, doing all it can to get advisors to clients with less than $65,000 in assets off their books and handled by other professionals at the company.
"This is our third year of keeping things pretty much the same, because we've heard from FAs that's how they want it," the company said in a statement. "In fact, in 2016 bonuses will be awarded to FAs with 75% of their client households at $250,000."
Wells Fargo aims to have smaller accounts managed by financial relationship advisors — advisor trainees who have passed their Series 7 exams and are working in wealth-management and brokerage branch offices. "Unlike what some other firms are doing with smaller accounts, this is not a mandate to relinquish smaller accounts; FAs have the option and will receive compensation [for transferring them]," the firm explained.
Through deferred compensation, advisors who "give away households" will receive an amount that is either equal to gross trailing 12-month fees and commissions in 2015 or 40 basis points of the account.
"Advisors get a full payout on trailing fees and commission for mutual funds, regardless of the household size; after a household is on the books for more than 12 months, advisors are paid 22% until the account is greater than $65,000," according to Wells Fargo.
Transferring small accounts "allows smaller households to receive more attention and helps to cultivate and grow these relationships" and "frees FAs to focus on larger households where they want to spend a majority of their time," the wirehouse said in the statement.
Major changes to Wells Fargo Advisors' core grid took place in 2014, when three pay "hurdles" were introduced. Advisors are paid 22% of the first $11,500, $12,500 or $13,250 of fees and commissions they earn each month; once they have topped these hurdles — which are based on performance, client experience and growth — the FAs get 50% payouts.
Beginning in 2015, advisors with yearly production of $400,000 and up were able to lower the 22% compensation hurdle by meeting other objectives, such as producing revenue growth of 15% or $150,000, having 60% of client assets in fee-based advisory accounts or 80% of their monthly fees and commissions tied to fee-based advisory accounts, and having lending credits of $6,000 or more.
For 2016, deferred-compensation best practices payouts are tied to $10 million in advisory asset flows, $8,000 in lending credits and having 75% of client households in the $250,000 asset level or higher. Reps get certain awards for meeting some of the criteria, while those who meet all three of these targets are eligible for premium awards.
Wells Fargo struck an exclusive recruiting deal with Credit Suisse involving about 300 reps in October. However, some of these advisors have been departing for rivals like UBS (UBS), which just recruited five of them with $1.1 billion in client assets; UBS also nabbed three Wells Fargo reps with $1.1 billion over the past few weeks. (In mid-November, UBS added four teams in Texas from Credit Suisse with $3.6 billion in client assets.)
Other Wirehouse Comp News
Morgan Stanley is emphasizing growth in its private bank operations, and its 2016 compensation plan for the firm's 15,800-plus advisors reflects this strategy.
In the third quarter of 2015, client loans made through Morgan Stanley advisors totaled $61 billion, up 5% from the prior quarter and up 27% from last year. (In the same period, fee-based asset flows declined to $7.7 billion vs. $13.9 billion sequentially but rose from $6.5 billion a year earlier.)
