Months after its parent bank Wells Fargo & Co. was hit with a $185 million fine for opening checking and credit accounts that customers never knew about or approved, its retail brokerage, Wells Fargo Advisors, has eliminated bonus compensation for advisers' sale of banking and lending products.
Wells Fargo Advisers held a conference call with its advisers on Thursday after the market closed to discuss the new plan, and then released the plan's details to the public. Such plans are typically kept under tight wraps by firms, who don't want to reveal to competitors their payment tiers and production goals for advisers.
In terms of an adviser's cash compensation, or base pay, there were “minimal changes for 2017,” according to the Wells Fargo release.
However, one Wells Fargo broker who was on the call noted that bonuses for bank products had been removed from the company's grid, or payout schedule.
In the past, Wells Fargo advisers could make up between $50,000 and $100,000 in deferred compensation annually for lending, said the adviser, who asked not to be named because he did not have the company's permission to speak to the press.
“Bonuses for lending look like they're totally gone,” said the adviser. “If you did some lending business in the past, it was really juicy.”
The adviser pointed to a part of last year's compensation plan, under which an adviser could earn a bonus of $2,000 to $100,000 depending on how much they grew their lending business.
Wells Fargo spokesman Jack Grone declined to comment on the changes in compensation for Wells Fargo's more than 11,000 advisers.
AdvisorHub.com, an industry news site, first reported on Wednesday that Wells Fargo Advisors was cutting the ability of advisers to increase monthly payouts and annual bonuses by selling mortgages and credit lines.
The Wells Fargo lending scandal continues to embroil the company. Last week, the Financial Industry Regulatory Authority Inc. said it wanted to speak to any fired Wells Fargo reps about cross selling at the bank and its retail brokerage.
The central part of Wells Fargo's compensation plan is not changing. Advisers receive a payout of 22% for the first $11,500 to $13,250 they generate each month and a 50% payout on revenue above that level, according to the company.
In performance awards, or deferred compensation, advisers who generated between $400,000 and $499,000 in fees and commissions are eligible for a base award of $1,000, while advisers who generate $500,000 or more are eligible for an award of $3,000. The maximum base award rate will be 7.5% of revenue, according to the company.
The company noted that there are a few changes in policy that will squeeze some advisers.
For example, advisers will receive a flat 20% payout on households with under $100,000 in assets under management, according to the company. That's up from last year's AUM minimum of $65,000, noted the adviser.
The firm is also charging advisers $25 when they give clients discounts on trades, which is an increase from the past, the adviser noted.