Wells Fargo Advisor's 2018 compensation plan keeps intact its current payout rates, but tweaks its deferred compensation awards and adds a layer to deferred compensation for advisers who do business with a higher percentage of households with more than $500,000 in assets under management.
In a summary of the plan reviewed by InvestmentNews, Wells Fargo Advisors said there was no change in payout rates of 22% and 50% to advisers. Those rates haven't changed since 2011.
Likewise, there was no change to advisers' "monthly hurdle," or the monthly production to qualify for cash compensation. For example, if an adviser produces less than $11,500 in revenue in a month, he receives a payout of 22%. If he generates more than $11,500 in revenue, he gets a payout of 50% on revenues above that amount.
NO PRODUCT BONUS
Last December, Wells Fargo Advisors told its 11,000 reps and advisers it was eliminating bonuses for advisers selling banking products. That change came months after its parent company, Wells Fargo & Co., was hit with a $185 million fine for opening checking and credit card accounts that customers never knew about or approved.
The 2018 compensation plan also has no incentive for any particular types of products, which is in line with other brokerage compensation plans in the wake of the Department of Labor's new fiduciary rule that has flattened commissions at many brokerage firms.
Like many other brokerage firms, Wells Fargo Advisors this year has been reworking its product lineup and compensation to be in line with the DOL fiduciary rule.
Wells Fargo Advisors in May said it was putting new limits on mutual fund share classes and types of securities advisers can sell or recommend in a client's retirement account. Starting in June, Wells Fargo now requires all new mutual fund purchases in brokerage retirement accounts to be executed in Class T shares.
The plan adds a new layer of deferred compensation with advisers that do business with wealthier households, dubbed the "client segmentation adoption award."
In previous years, the firm gave advisers a flat dollar award if 75% of clients had at least $250,000 in assets under management. That compensation is no longer a flat dollar amount but rather a percentage of revenue. Advisers who have 75% of households with more than $500,000 in assets under management qualify for a new award, which the company's summary did not detail.
Both individual advisers as well as teams are eligible for the new deferred compensation awards.
There is also no change to Well Fargo Advisors' "base awards." Advisers who generate between $400,000 and $499,000 annually are eligible for $1,000 in deferred compensation. Those who produce $500,000 or more in revenue are eligible for either $3,000 or a higher "calculated award," according to the company's summary.