On Advice

Will Wells Fargo Advisors force brokers to become salesmen only?

Some advisers fear that Wells Fargo is moving to standardize all investment decisions

Jul 19, 2018 @ 5:05 pm

By Bruce Kelly

Some of Wells Fargo Advisors 14,000 reps and advisers were buzzing Thursday, a day after Yahoo Finance published a story that reported that 200 private bankers who work with the firm's richest clients have been pushed by management to work more as salesmen and less as investment advisers.

The changes over the past few years detailed in the story include private bankers being labeled investment strategists rather than investment managers, with their focus on managing clients. The actual investment management was handled by service centers in Las Vegas, Charlotte, and elsewhere.

"Documents show that within the wealth management part of Wells Fargo's high-net-worth private bank, investment management control was transferred from human advisers to formulaic models — a move that does ensure consistency and reduce the risk that an adviser does something crazy, but one that the former advisers felt was also designed to make advisers focus on sales," according to Yahoo, which based its story on a review of hundreds of pages of Wells Fargo documents and interviews with four former employees.

One former Wells Fargo private banker was quoted as saying that the firm emphasized sales to such a degree that he felt he was like the salesman in David Mamet's 1983 Pulitzer Prize-winning play "Glengarry Glenn Ross," a tale that depicts desperate salesmen shilling real estate in Chicago.

Financial advisers are fearful that management will introduce similar changes across Wells Fargo Advisors, removing investment and portfolio management decisions such as stock picking and fund selection out of the hands of advisers, according to a Wells Fargo source.

Wells Fargo Advisors is owned by Wells Fargo & Co., the giant bank. The unit is part of the bank's Wealth and Investment Management — WIM — division.

"The bank wants to run WIM the way they run a bank client, all the same," the Wells Fargo Advisors source said. "They try to claim that standardization reduces risk and improves performance, and that may be true the past 24 months, but it wasn't so in 2015 when their models underperformed a simpler benchmark."

"At Wells Fargo Wealth and Investment Management, our goal is to work closely with clients to provide the right mix of services for their needs, offered by team members dedicated to taking care of clients the right way," said a Wells Fargo spokeswoman, Shea Leordeanu, in an email. "We embrace a holistic investment objective process and fully believe in our optimized portfolios approach."

Wells Fargo Advisors reported last Friday that it continued to see a decline in the number of brokers and advisers working at the firm's various channels, reporting a net loss of 173 registered reps — or 1.2% of its total adviser sales force — during the second quarter of this year. Over the last 21 months, Wells Fargo Advisors has seen a 5.7% decline in its adviser workforce, falling from 15,086 individuals in September 2016 to 14,226 at the end of June.

The retail brokerage unit of Wells Fargo began to hemorrhage advisers in the second half of 2016; that September, the parent company revealed a scandal in its retail banking that resulted in Wells Fargo being fined $185 million for opening banking accounts for a few million customers without their knowledge or approval.

Some Wells Fargo reps and advisers have retired and others have jumped to competing firms, including independent broker-dealers.

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