“We are looking right now at support structures for our different channels,” Heather Hunt-Ruddy, head of client experience and growth for Wells Fargo Advisors, tells FA-IQ. But she denies there are plans afoot — as reported last month in the Wall Street Journal — to fuse Wells Fargo Advisors’ traditional and bank-based retail brokerage groups.
Rather, says Hunt-Ruddy, Wells Fargo plans to instil greater operational efficiency across all wealth management business lines, including Wells Fargo Advisors’ Private Client Group, which now has about 14,200 FAs, mostly in brokerage-branch offices, and its bank-branch-based Wealth Brokerage Services, which employed about 4,500 advisors at the end of March.
“A description I’ve seen used to describe what’s supposedly going on here is ‘channel collapse,’ which couldn’t be further from the truth,” insists Hunt-Ruddy. “There will be no ‘channel collapse.’”
From Wells Fargo’s perspective, the nascent initiative to tighten up operations is, in the main, client- rather than advisor-centric.
“We want — no matter how the client interacts with us, whether phone-based or digital, on up through our biggest relationships — that there’s one set of policies and procedures for everybody,” Hunt-Ruddy says. “That’s all we’re doing. Looking at those structures. But it seems to have caused some confusion in a vacuum of information.”
Hunt-Ruddy’s explanation makes a certain amount of sense to one wealth industry consultant, especially given the layers of legacy systems accumulated in Wells Fargo’s wealth division through mergers, acquisitions and innovations across business lines. “There is a lot to sort through there,” says this expert, who asked not to be identified. “You might say they’re overdue for some housecleaning.”
Wells Fargo Advisors
There’s also lots to process when it comes to assessing claims scandal-plagued Wells Fargo is undergoing significantly more advisor attrition than big-brokerage rivals — nicknamed “wirehouses” — such as as UBS Financial Services, Morgan Stanley’s wealth division and Merrill Lynch, the retail brokerage arm of Bank of America.
Wells Fargo Advisors shed about 2% of its advisor force year-over-year in its most recent second quarter, which ended last month. That outpaced Morgan Stanley, whose Q2 headcount was down 1% for the year, and Merrill, whose June-quarter numbers were practically unchanged. UBS has yet to report fresh numbers.
For Wells Fargo, a 2% drop in headcount is regrettable in that “we don’t like it when anybody leaves” but “it’s not a dramatic” outcome — especially in a “tough quarter” that saw the expiration of “the A.G. Edwards retention deal,” says Hunt-Ruddy, referring to commitments undertaken by her employer after its 2008 acquisition of Wachovia to retain advisors at A.G. Edwards, which Wachovia had purchased the year before. Besides that, she adds, 80% of recent attrition is down to “people retiring” — a process aided, she claims, by the firm’s generous succession procedures.
And Hunt-Ruddy says there’s another thing skewing the picture.
While Wells Fargo doesn’t say when it lands new advisors as a matter of policy, many of its competitors, especially regional brokerages and independents, are quick to issue press releases on new hires.
That said, Wells Fargo isn’t the only brokerage beset these days by the demise of retention packages rolled out to attract antsy FAs in the tumult before, during and right after the 2008 financial crisis. But it does stand out as the most scandal-addled big bank of the post-crisis era — a status more striking for the comparatively benign reputation the company enjoyed beforehand.
Going back two years, San Francisco-based Wells Fargo has been fined — in one case a cool $1 billion — or investigated for opening accounts without customers’ permission to meet aggressive quotas, overcharging for insurance and, latterly, changing business-client data to meet a regulatory deadline. The first batch of scandals did in a clutch of top Well Fargo executives, including then-CEO John Stumpf, and nearly 3,500 rank-and-filers fingered for hands-on malfeasance.
And in March this year, a wealth management shoe dropped. That’s when Wells Fargo told the SEC it had responded to “inquiries from federal government agencies” by initiating an internal review of retail brokerage practices “to assess whether there have been inappropriate referrals or recommendations, including with respect to rollovers for 401(k) plan participants, certain alternative investments, or referrals of brokerage customers to the company’s investment and fiduciary services business,” according to a Wells Fargo statement.
Whether that’s had an impact on advisor migration from Wells Fargo Advisors is tough to say. A consultant who spoke to us on condition of anonymity says it’s more likely Wells Fargo FAs keen on leaving would invoke the scandals as an excuse to skedaddle than a client would bring it up unbidden. “It’s better than saying you want to go to get a better paycheck,” the consultant says.
Meanwhile Hunt-Ruddy says Wells Fargo’s “attrition has slowed” in recent months, with “between 20 and 60 advisors a week coming in to kick the tires, so to speak.” In this setting, she says, talks focus not so much on the bank’s overall viability as on ways to transfer clients to an institution that’s “still such a fun media story, if you’ll pardon the sarcasm.”
The answer? “We emphasize we’re probably the most looked-at company in America,” says Hunt-Ruddy. This point about heightened scrutiny, she adds, seems to be working with FAs and clients alike, though she fails to provide solid numbers. “We’ve hired a lot of people, and their books are moving with them as well as anyone’s.”
For Paul Spitzer of Advanced Practice Advisors, a boutique RIA and an RIA business consultancy, Wells Fargo’s attrition woes, mending or not, pale against a bigger shift in the wealth management space.
“I don’t know if the wirehouses can survive as they are for another 10 years,” says Spitzer, an ex-Wells Fargo advisor who is based in La Quinta, Calif. “You’re making less than 40% of the 100% of the assets you bring in and you’re in the highest tax bracket known to man, whereas in an independent RIA, you get 80% even if you run a sloppy business, and you’re in a low tax bracket.”
Adds Spitzer: “Plus at Wells, you get all that bad press.”