Wells Fargo Advisors sweetens the pot for both older and younger advisers

Under the changes, retiring reps get a 25% bonus and younger advisers get help acquiring the business of those leaving the firm

Mar 11, 2019 @ 2:46 pm

By Bruce Kelly

After bleeding advisers for more than two years, Wells Fargo Advisors is changing its succession plan by offering a bonus to advisers who stay on until retirement and giving financial help to young advisers acquiring the business of those advisers who are retiring.

Under the new program, Wells Fargo reps and advisers who are eligible and retiring can receive a deferred bonus of 25% of the adviser's prior year's fees and commissions, known as the "trailing 12" in brokerage industry parlance.That means a retiring adviser could receive a total valuation of 225% of his annual fees and commissions.

The new bonus has a five-year vesting period, according to the firm. The new plan is an additional part of the firm's current succession program for its close to 14,000 reps and advisers.

In turn, when a current adviser is buying the book of business from a retiring adviser, Wells Fargo Advisors is stepping into the transactions as a sort of underwriter in the deal and will provide up to 100% of the "trailing 12" that the younger adviser is purchasing from the retiree. That is significant because it is standard practice for the younger adviser, after the firm finances the acquisition of the retiring advisers' clients and assets, to pay the firm back over several years' time.

"This is a big deal," said one Wells Fargo Advisors rep, who asked not to be named. "I do believe this could be a deal changer to keep retiring advisers at the firm by having Wells Fargo provide a significant incentive that challenges what an adviser can get if he moves his book to another firm and gets a bonus."

"I believe many advisers will look at this deal and consider taking it, locking in their T-12 based on the strong 2018 production numbers," the adviser added.

There is a catch, the adviser noted. The advisers getting the added compensation under the new plan, dubbed the Summit Program at the firm, work under a three-year non-solicitation agreement. Advisers typically dislike such agreements.

"I think it's an interesting idea," said Louis Diamond, an industry headhunter. "Wells Fargo is changing two things. First, there is the 25% bonus to enroll in the program. Next, the firm is putting real money into succession buyouts, totaling almost half of maximum value of the buyout."

"It's a form of a retention deal for the older advisers, and the firm putting up real money is a way to hang onto younger advisers buying book," he said.

"The non-solicit helps to protect the financial investment the buying [financial adviser] is making in the transaction," said Kim Ta, director of planning and succession programing at the firm. "It also protects sellers' payment stream in retirement, and to protect the significant financial investment that WFA is now making to both parties."

The new retention and retirement plan required years of planning, according to one firm executive.

"It's no surprise we have a demographic of advisers who are considering retirement," said John Alexander, head of advisor-led business for Wells Fargo Advisors. "In the next five to 10 years there's going to be a massive transfer of clients from one generation to the next and we want to ensure the transition for clients is as seamless as possible."

The new program for retiring advisers at Wells Fargo, which takes effect in April, comes on the heels of other significant moves by the firm to bolster its ranks after losing hundreds of advisers in the wake of scandals at its parent bank, Wells Fargo & Co., starting in September 2016.

Wells Fargo Advisors kicked off the year by touting one of the most lucrative recruiting deals currently offered in the retail wealth management business that is worth potentially 325% of a rep's previous year's fees and commissions. Also earlier in 2019, Wells Fargo Advisors broadened its platform to allow its reps to work as distinct registered investment advisers, a move its wirehouse competitors have not yet made.


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