Wells Fargo’s disappearing advisors: Headcount down a net 456
Wells Fargo’s advisor ranks fell again, dropping a net 456 year-over-year.
The bank reported 13,512 advisors on its rolls — down from 13,968 for the same period a year ago, according to Wells Fargo’s earnings issued Tuesday.
The wirehouse has struggled to hang onto talent as hundreds of advisors have made for the exits over the past three years, in part due to ongoing scandals and regulatory problems associated primarily with the firm’s consumer bank.
The other headwind Wells Fargo faces is industrywide: an aging workforce.
Research firm Cerulli Associates estimates that roughly 37% of advisors are expected to retire over the next decade. In response, firms have retuned succession planning programs to incentivize senior advisors — and the hefty assets they manage — to stay put until they retire rather than move to a competitor that may offer a more attractive recruiting and retirement package.
Wells Fargo revamped its retirement program for employee advisors in March 2019, adding new incentives for retiring advisors as well as for those inheriting the departing advisor’s book of business. The firm also added a non-solicitation provision. Wells executives said at the time they anticipated “lots of transfers of client books” as a result of demographic changes in wealth management.
The retirement program is available to a smaller brokerage force than Wells Fargo fielded a few years ago. Headcount stood at 15,086 for the third quarter 2016 when the bank’s fake accounts scandal first came to light. The firm fields approximately 1,500 fewer advisors today.
During that time the bank has paid more than $1 billion in regulatory penalties and fines, the Federal Reserve imposed an unprecedented cap on Wells Fargo’s growth and the bank has replaced its CEO twice.
Wells Fargo’s new CEO, Charles Scharf, acknowledged the firm’s ongoing regulatory woes during a call with analysts. “We have not effectively addressed our shortcomings,” he said.
Effectively or not, Wells Fargo is still in the process of addressing its issues. The bank took a $1.5 billion charge during the fourth quarter for litigation accruals, which included “previously disclosed retail sales practices matters,” Wells Fargo said in its quarterly report.
Many advisors who have left the wirehouse have found new homes at regional broker-dealers such as Stifel, Raymond James and Benjamin F. Edwards.
Wells Fargo has upped its recruiting efforts. A company spokeswoman said the wirehouse had its best recruiting year since 2016. She did not share specify the number of advisors the firm had hired.
New recruits in 2019 had an average production of $719,000, up from $565,000 for the prior year, the spokeswoman said.
“Our decline [in headcount] this quarter was based primarily advisors retiring and leaving the industry. We are optimistic about our recruiting prospects for 2020,” she said.
Wells Fargo’s client assets, meanwhile, have risen in part due to higher market valuations. The wealth management business — which includes a wirehouse, an independent broker-dealer and a bank channel — reported client assets rose 10% year-over-year to $1.9 trillion.
The wealth management unit’s net income fell due to higher expenses and lower revenue. Net income plummeted 63% to $254 million. Net interest income dropped 18% to $910 million due to the low interest rate environment, according to Wells Fargo. And noninterest expenses soared 23% to reach $3.7 billion.
The firm attributed wealth management’s net income drop to, in part, “higher equipment expenses.” A company spokeswoman declined to provide additional details.