What message is Wells Fargo sending with its RIA program?
For Wells Fargo, the new year brings a new channel — and with it new opportunities and challenges.
The firm intends to test an RIA program. David Kowach, president of Wells Fargo Advisors, revealed the plans at a recent industry conference, explaining that the company will start the initiative in a few cities.
Wells Fargo already fields about 14,000 advisors in three channels: bank, wirehouse and an IBD, but the incentives to expand into the RIA space are obvious given the rapid growth of independent firms in recent years.
Yet while the RIA business model is undoubtedly the golden child of financial services, how will this mesh with Wells Fargo? How will Wells Fargo be able to deliver autonomy, independence and an unsullied brand image to support its new RIA advisors when they have clearly had difficulty achieving that result in its other business channels?
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Consider what has been attracting advisors to independence. The RIA space is powered by next-generation technology. It’s also the place where advisors can try strategies generally not permitted in the wirehouses: billing for financial planning, real social medial marketing, advisor website development, multi-custody access, true account aggregation and so on.
Wells Fargo has been losing brokers to the independent space for years for precisely these reasons. The firm’s technology offerings have been seen as dated by advisors. The wirehouse is also seen as inflexible. Can a firm dominated by a bank compliance culture allow more flexibility and outside-the-box thinking?
But let’s give credit where credit is due, Wells Fargo will be the first wirehouse to enter the RIA space in a move which required foresight, fortitude, and humility. This is also not the first time Wells Fargo has engaged in first-mover behavior. Many years ago, the firm tiptoed into the "independent" advisor channel by offering top-producing advisors and teams the option of “profit formula.” Depending upon who you ask (advisors or executives) “profit formula” devolved or evolved into its FiNet option. And there has almost always been another alternative option for advisors through its white-labeled correspondent clearing firm, Wells Fargo Clearing.
Wells Fargo’s nascent RIA program conveys a realization by executives that the RIA model has proven to be an attractive landing spot for its advisors relative to its current, captive W-2 private client group.
So which Wells Fargo will the nascent RIA channel represent: Innovative pioneer or floundering wirehouse?