Wells Fargo sweetens compensation for advisors with wealthier clients
Wells Fargo tweaked deferred pay for some of its advisors under next year's compensation plan, benefiting those who work with wealthier clients, but the firm otherwise left its cash grid unchanged.
The wirehouse made no changes to monthly hurdles and payout rates under the cash compensation part of advisor pay, according to a summary of the plan reviewed by On Wall Street.
The firm's payout rates, at 22% and 50%, have not changed since 2011. Wells Fargo advisors must meet one of three monthly production hurdles ($11,500, $12,500 and $13,250) in order to qualify for a 50% cash payout on revenue above those levels. The hurdles have not changed since 2014, according to the firm.
The firm is rewarding advisors with new rewards for growth – and cutting pay for those who don't hit certain hurdles.November 9
The move continues the wirehouse's transformation under Tom Naratil, president of UBS Wealth Management Americas.October 17
The new comp plan for its employee channel advisers goes into effect in September.July 11
Wells Fargo unveiled the plan last week, making it the latest wirehouse to do so. In recent years, some firms have been tweaking pay plans to encourage advisors to pursue greater growth.
In Wells Fargo's case, the firm introduced a complicated set of criteria for advisors to qualify for an under-hurdle payout of 50% (meaning, advisors can get a high payout on revenue generated under one of the three hurdles).
For example, an advisor with 75% of client households of $250,000 or more in assets under management can qualify if he or she generates trailing 12-month total gross revenue of at least $2 million and is also a graduate of DELTA, the firm's training and coaching program.
The wirehouse is also offering advisors client segmentation awards, which give bonuses to advisors if they transfer smaller accounts to their younger counterparts. Advisors who participate get the better of either 40 basis points of the transferred household's AUM or the 2017 revenue generated by said household.
Advisors can also earn extra money if 75% or more of their client households have $250,000 or more in AUM. The award has been changed to a percentage amount from a flat-dollar payout.
For example, an advisor generating $500,000 in revenue and whose book of business consists of 75% of households of $250,000 or more in AUM can earn an extra 2.25% of total gross revenue.
These changes build on previous ones meant to spur advisors to grow their businesses.
For example, last year Wells Fargo amended its small household policy under its compensation plan. Under the 2017 play, advisors were paid a flat 20% rate on household accounts of $100,000 or less. Under the 2016 plan, the figure was $75,000.
Also last year, the firm cut some bonuses tied to lending from its compensation plan. For example, advisors once had the ability to earn up to an additional $100,000 for growth in lending credit. That change came after several years in which wirehouses incentivized brokers to do more lending with clients. Securities-based loans and similar products generate a larger portion of the firm's revenue.