Is Wells Fargo Advisors Really Nicer Than Other Wirehouses, Or Is It Just Pretending?
As UBS and Morgan Stanley, two of the four biggest bank-owned "wirehouses," go bare knuckles to keep productive FAs from absconding with end-client assets, rival Wells Fargo stands out to some observers as a relatively accommodating place to run a captive financial advice practice.
"Wells Fargo is the exception" to Wall Street’s new get-tough rules, says seasoned advisor recruiter Mark Elzweig. Wells Fargo Advisors, the brokerage division of San Francisco-based Wells Fargo & Company, "values advisors at all different levels" and not just heavy hitters, the headhunter adds. "It’s not a pressure-cooker environment."
But others wonder if this stance is truly rooted in the firm’s culture. These doubters say Wells Fargo is playing nice in the face of a longstanding shift in consumer preferences and a brand-mauling scandal in the parent company’s retail bank.
Though still dominant in the wealth industry, the four big wirehouses -- Wells Fargo, Merrill Lynch, UBS and Morgan Stanley -- have been losing ground in terms of end-client assets since well before the Great Recession. In 2003 Tiburon Strategic Advisors flagged what was coming. The San Francisco-area research firm said wirehouses -- then a five-firm club -- were growing slower relative to channel size than either independent broker-dealers, which were adding headcount at a faster clip, or RIAs, which -- again, relative to size -- were doing better gathering assets.
Since the crash in 2008, and despite the subsequent bull market, this trend has only accelerated. By 2020, Cerulli Associates projects wirehouses will control less than 50% of U.S. wealth management assets for the first time in a generation.
David A. Noyes & Company
In response, most of these firms have changed tactics. Eager after the downturn to lure productive FAs from rival firms with head-turning signing bonuses, over the past year or so all wirehouses but Wells Fargo have slowed their gravy trains and hit pause on aggressive recruiting.
Then, late last year Morgan Stanley and UBS abandoned the Protocol for Broker Recruiting, a long-standing agreement governing advisor moves between firms and curtailing related legal disputes.
Commenters saw this as an admission by these firms that they were now net losers in the recruiting wars and see themselves better served by obstructing departures than by playing footsie with turncoats.
Again, though, Wells Fargo held the line, sticking with the Protocol -- and this week assuring FA-IQ it has no intention of changing its mind about that.
For Elzweig, Wells Fargo’s stance as a more relaxed partner to its FAs is a permanent part of its culture. "They’ve always been that way," says the New York-based recruiter. "It goes back to their roots as a collection of regional firms. They want you to succeed and they have the tools and resources. But there’s not the same relentless pressure you find at the other wirehouses."
That’s an assessment Rich Getzoff can live with. As leader of Wells Fargo’s financial advisors in the eastern U.S., and a 20-year veteran of the firm, he agrees Wells Fargo Advisors is a product of a decidedly non-Wall Street legacy that includes Prudential Securities, its direct successor Wachovia Securities and A.G. Edwards, which merged with Wachovia shortly before Wells Fargo absorbed the business into its own securities unit in the financial crisis 10 years ago.
"Our culture is a distinct competitive advantage" when it comes to attracting and keeping FAs, says Getzoff. "We take a lot of pride in being a national firm that’s also a regional firm because of our roots."
Getzoff says Wells Fargo underlined its brokerage’s regionality a decade ago when it opted to go with Wachovia’s pre-merger decision to make St. Louis -- home to advisor-centric A.G. Edwards -- the capital of its national advice business.
For Getzoff, that highlights the newly combined firm’s ongoing commitment to "client engagement and the gentle, friendly culture" that, he says, characterized A.G. Edwards as a standalone firm.
But Chris Cooke, an advisor who left Wells Fargo late in 2016 for David A. Noyes & Company, thinks his old employer is playing a part.
"They have to be nice right now," Cooke tells FA-IQ. "They’ve got a serious reputational issue due to what’s happening at the bank," he adds in a reference to the Wells Fargo account fraud scandal.
That ongoing imbroglio arose from fraud committed by employees of Wells Fargo’s retail banking division. While the immediate cause of the scandal was the opening of bank accounts for customers without their consent, these actions seem to have been spurred by a hyper-aggressive sales culture under ex-CEO John Stumpf.
The fallout has been notorious. In addition to prompting Stumpf’s resignation and the departure of a slew of his underlings, Wells Fargo got fined $185 million amid buzz on Capitol Hill that the megabank should be dismembered. Now, every new scandal at the company -- from allegations of racial discrimination in mortgage lending to whistleblower claims that some of its wealth managers were self-dealing -- gets amplified.
In this public-relations maelstrom Wells Fargo can’t afford to rile its 15,000 advisors by taking a hard line, says Cooke -- as much as "deep down inside they may desire to be out of the Protocol" and free to impose more stringent non-competes.
"It’s really hard to penetrate C-suite thinking," adds Cooke, a member of Noyes’ board of directors. "So you have to judge by the actions taken -- with the understanding too that the wirehouses tend eventually to move as a block."