Grid creep at Wells Fargo?

Released in September and October, the wirehouse 2026 pay plans appear stable compared to recent years.  

But one firm recently noted a potential fly in its soup. Wells Fargo reported last month rising compensation costs at its wealth and investment management group.  

Pay can drive behavior at the big firms, and advisors at times are offended or put off by changes in pay plans that call for more sales of banking products or lending.  

To keep their financial advisors happy, the big four wirehouses − Merrill Lynch, Morgan Stanley, Wells Fargo Advisors and UBS − recently rolled out pay grids for 2026 that mimic recent years, and at a time when many advisors are earning more money than ever as the broad stock market continues to hit record highs.  

Financial advisors generate fees for themselves and their firms based on their assets under management (AUM), so the higher the clients’ assets, the more revenue a financial advisor pockets.  

And the stock market this year has not disappointed. After a difficult start, the S&P 500 has continued to reach new record highs and has increased by 18.3 percent through October 28. And that’s in the wake of posting total returns, including dividends, 25 percent in 2024 and 26.3 percent in 2023.  

The rising tide of the stock market is welcome news for advisors and their clients.  

But the compensation math at wirehouses, along with independent broker-dealers such as Commonwealth Financial Network, acquired this year by LPL Financial Holdings, at times could burn out the best pocket calculator.  

As noted, the stock market has seen repeated strong returns the past few years, with wealth management firms reporting record client assets and record firm revenues. On the other side of the ledger, however, are rising expenses that firms desperately want to control to maintain or broaden profit margins.  

One wirehouse bank, Wells Fargo & Co., reported last month increasing compensation expenses at its Wealth and Investment Management group, which houses roughly 12,000 advisors under the brand Wells Fargo Advisors.  

“Noninterest expense increased 8 percent due to higher revenue-related compensation expense and operating costs, partially offset by the impact of efficiency initiatives,” according to the company’s third quarter earnings report from October 14.  

A Wells Fargo spokesperson declined to comment when asked about increasing expenses at its wealth and investment management group.  

“What happens at firms when assets go up is something called ‘grid creep,’” says Andy Tasnady, a compensation consultant for wealth management firms and managing partner at Tasnady & Associates. In wirehouse parlance, the grid is the formula by which advisors get paid, typically 35 to 45 cents per dollar of revenue they generate.  

At regional firms, advisors are paid up to 60 cents per dollar of revenue. And at independent contractor firms such as LPL and Commonwealth, payouts can reach 90 percent − or 90 cents per dollar.  

“In this kind of a stock market, advisors will get better compensated when they cross the compensation thresholds set up by the firms, say from $500,000 in annual revenue to $1 million to $2 million,” Tasnady says. “That’s the grid creep.”  

“But the problem firms must watch out for is when revenues are flat and compensation expenses are up,” he adds.  

That’s not the case at Wells Fargo, even with noninterest expenses increasing at the wealth and investment management group. For the three months ending in September, net income at the unit was $591 million, an increase of 12 percent compared to the same quarter in 2024.  

About a week after releasing its third quarter earnings, Wells Fargo Advisors said it was keeping advisor pay steady in 2026. That announcement followed Merrill Lynch’s statement in September that it was minimizing pay changes in 2026. Morgan Stanley’s pay plan for its advisors next year also remains pretty much the same, although it lowered the amount advisors contribute each year in deferred compensation − meaning they get to hang on to a bit more of the cash they generate each month.  

As for UBS, it backtracked in September and said it was raising the payouts earned by US financial advisors, aiming to retain and hire advisors at a time of intense competition for talent.  

“UBS took away on pay and then gave it back to advisors,” says Danny Sarch, an industry recruiter as well as president of his firm, Leitner Sarch Consultants. “What drives firms crazy is − and they won’t say it publicly – is the notion of, ‘why are we paying these guys so much?’” 

Meanwhile, on the independent broker-dealer or non-employee side of the industry, a compensation issue facing advisors at Commonwealth Financial Network’s roughly 3,000 financial advisors is the platform or administrative fee they pay. Advisors at independent firms pay 10 to 20 basis points of clients’ assets for account services.  

“Independent advisors get their payout, but the platform fee can make a significant difference,” said one senior industry executive, who spoke privately to InvestmentNews about the matter.