Wells Fargo to implement new fee on advisory accounts

The charge will equal about $590 on an account with $1 million in advisory assets, and could be offset by revenue sharing from mutual funds

Jan 29, 2019 @ 2:49 pm

By Bruce Kelly

Wells Fargo Advisors is hitting clients with a new annual fee on advisory accounts that is roughly six basis points — equal to $590 per year on the average client with $1 million in advisory assets — according to a memo sent to the firm's advisers this week.

The new fee applies to all advisory accounts. However, clients could receive a rebate based on revenue sharing from mutual funds that could offset the new fee or even provide a net credit, according to the memo, a copy of which was obtained by InvestmentNews.

Wells Fargo Advisors receives revenue from several areas; those include advisory fees, minus the payout to brokers and financial advisers, and some investment management programs that charge administrative or management fees.

"The fee supports services we provide to maintain the platform for all advisory accounts, including technology and record keeping services provided to mutual funds available on our advisory platform," according to the memo. "Similar approaches have recently been implemented by some competitor firms."

The new fee, which will be charged each quarter, will not be shared with financial advisers, according to the memo.

The fee will be displayed as a line item on clients' account statements. Explaining the fee, as well as the new credit that could potentially offset the fee, is in line with Wells Fargo Advisors being open about costs and the payments the firm receives from mutual fund companies, according to the company memo.

The fee increase comes at a time when the firm is continuing to lose brokers and report a decline in revenue.

This month, Wells Fargo & Co. reported total revenue of slightly less than $4 billion at its Wealth and Investment Management group for the fourth quarter. That represented a decline of $376 million, or 9%, compared with a year ago.

Wells Fargo also reported it had 13,968 financial advisers across its various channels at the end of December. That's a decline in headcount of 106 for the quarter and 576, or 4%, for the year.

The fee increase will hit clients this spring. It was not clear how many Wells Fargo Advisors clients would feel the impact of the new advisory account fee, which will not be charged to certain retirement accounts such as ERISA and Sep IRAs, whether or not they hold mutual funds.

"In step with other firms in our industry, beginning on or around April 12, 2019, Wells Fargo Advisors will apply a quarterly advisory platform fee and advisory account credit to eligible advisory accounts," wrote company spokesperson Kim Yurkovich in an email to InvestmentNews.

"On the same day the fee is applied, we will credit clients' accounts based on the platform support we collect from mutual fund companies," Ms. Yurkovich noted. "While we expect the credit will vary over time, at this point, we anticipate this change will be cost neutral or slightly positive for clients when we implement the fee/credit in April."

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