Wells Fargo is seeing more adviser retirements after an 'enthusiastic' response to its next-gen handover payouts
- Wells Fargo said retirements drove adviser headcount lower in its wealth management arm in the third quarter. t
- San Francisco-based Wells expects retirements to continue as it uses incentives to encourage its own advisers to take over client books when people retire. t
- Like the broader wealth industry, the firm is facing a retirement cliff that some fear could leave firms without enough young talent to hold onto existing client assets. t
- Wells has lost some 1,400 advisers since a sales practices scandal first came to light in its retail arm in 2016. But for the third quarter, it said that it hired more people in than the number of people that left for competitors. t
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Wells Fargo said retirements drove its financial adviser headcount lower in the third quarter, and it expects to see more retirements as it uses incentives to encourage younger advisers to take over clients.
Like the broader wealth industry, Wells Fargo is staring down a retirement cliff that some fear could leave firms without enough young talent to hold onto existing client assets. Enhanced young adviser training and succession programs are examples of firms looking to help bridge that gap.
The number of advisers in Wells' wealth management arm fell to 13,723, the bank said on Tuesday, down 76 people from the second quarter and 351 below the year-ago period. Adviser headcount is now some 1,400 below where it was before the bank's sales practices scandal first came to light in its retail arm in 2016.
But Wells Fargo, one of the biggest US wealth managers, said that the most recent quarterly decline reflected adviser retirements, and that it had meanwhile hired more advisers in than had left for competitors.
Read more: Merrill Lynch hiked starting salaries for trainee advisers by $10,000 and has taken on 1,700 newbies so far this year. We have the details.
Wells rivals like Bank of America Merrill Lynch are keenly aware of the demographic challenge. Merrill president Andy Sieg told us earlier this month that the firm had bumped up the starting salaries for trainee advisers - and has deployed performance managers around the country to coach them as it's dialed back on more experienced hires. He also said that a team-based approach is key to setting up next-gen advisers for success.
Wells Fargo Advisors for its part leaned into accelerating handovers when it introduced its Summit program during the second quarter, which is aimed at encourage retiring financial advisers to sell their books within the firm. It bills the program as a means to transition clients from a retiring adviser to a successor.
"We anticipate continued retirements, as we've seen enthusiastic response to Summit, our enhanced succession program," Wells Fargo Advisors communications manager Kim Yurkovich told Business Insider in an email.
Here's how the program works: the firm offers a bonus arrangement and optional loan feature to remaining advisers who are taking on books of business from retiring advisers. To sweeten that deal, advisers exiting the firm can also receive a deferred payout of 25% of the revenue they generated over the last year. Then, the adviser taking on those clients gets his or her own award from the firm of up to 100% of that book's revenue over the last year.Read more: Wells Fargo has seen 1,000 financial advisers depart since its sales scandal broke in 2016. Here's how it's fighting back to retain talent and attract young hires.
Wells Fargo Advisors had also introduced a tool designed to build teams and help out with succession planning. It can help new FAs find a team or find someone that is interested in handing over their books.
Yurkovich declined to provide precise metrics for advisers opting into the Summit program; John Alexander, head of integrated brokerage for Wells Fargo Advisors, told us last month that "interest in the program has been very strong."
Yurkovich, the company spokesperson, said on Tuesday that the average productivity for Wells' experienced new hires' is 33% higher year-to-date than it was last year.
"Further, these new hires do about 58% more production than the average advisor leaving for competitors - evidence that we are recruiting larger producers than those leaving," she said.Read more: Wells Fargo posts earnings miss driven by $1.6 billion expense linked to scandals
Recruitment pipelines "remain strong," Yurkovich said, adding Wells hired more advisers than left to competitors.
Beyond Wells' wealth management arm, the San Francisco bank is in a moment of transition. It's trying to move forward while operating under a punitive growth cap imposed by the Federal Reserve, and deal with various sales practices scandals that started coming to light three years ago.
Wells has recently reshuffled leadership inside and out of wealth management. The firm in late September named Charlie Scharf, the former chief executive of BNY Mellon, as its new CEO effective October 21. He will replace Allen Parker, who had served as interim CEO since March.
In July, the firm named Jim Hays, previously head of the Private Wealth Financial Advisors group, which caters to high-net-worth clients, as Wells Fargo Advisors' president and head.
Hays took over for David Kowach, who went to head community banking. Hays reports to Jonathan Weiss, head of wealth and investment management.