Wells Fargo Loses 258 FAs Year-Over-Year
Financial advisors continue fleeing the scandal-ridden Wells Fargo, with the company posting a net loss of 145 representatives in the last quarter and a net loss of 258 year-over-year, according to the firm’s latest quarterly earnings report.
Advisor count in the firm’s wealth management units was down to 14,399 in the first quarter of 2018, according to the report. That’s down from 14,544 in the last quarter of 2017 and from 14,657 in the first quarter of 2017, according to those quarters’ reports.
Wells Fargo has been under regulatory scrutiny since September 2016, when the company settled for $185 million following revelations that employees in its retail bank division, driven by high sales targets, opened millions of bogus debit and credit accounts. Wells Fargo’s wealth management units, despite mostly avoiding regulators’ crosshairs until recent months, began losing advisors in the last quarter of 2016 and consistently shed representatives every quarter except in the third quarter of 2017, when it managed to add 37 new advisors.
Advisors kept leaving even despite late-2017 reports the company would raise payouts to its top brokers.
But the units then suffered another blow, when in December the U.S. Department of Justice ordered Wells Fargo’s wealth management division conduct an internal review of its sales practices. And last month, the Wall Street Journal reported that the units were under direct investigation by the Justice Department and the SEC.
Earlier this month, current and former Wells Fargo advisors told Bloomberg that similarly aggressive targets and lucrative bonuses were also offered in the wealth management division to encourage aggressive sales that weren’t necessarily in the best interests of the clients.
Aside from shedding more advisors, Wells Fargo’s wealth management units had a rather strong first quarter this year. Net income was $714 million, up from $675 million the previous quarter and from $665 the year prior, according the latest earnings report.
Wells Fargo says it benefited from the lower income tax rate. Revenue in the units, however, dropped 2%, which the company blames on lower gains on deferred compensation plan investments, lower transaction revenue — which was offset by higher asset-based fees, the company claims — and lower net interest income, Wells Fargo says.
Total client assets for the wealth management division, meanwhile, were $1.9 trillion in the first quarter, a 4% increase from the year prior, according to the report. The company attributes the growth to higher market valuations.