Wells Fargo's indy group, FiNet, bumps up fee for big advisors

Just as Wells Fargo Advisors is working to boost its head count, its independent advisor arm is increasing a fee for financial advisors with larger amounts of assets.

The move may seem counterintuitive to some as Wells Fargo Advisors is driving the growth of its independent advisor business after seven years of seeing thousands of its wealth management advisors either jump to competitors or retire in the wake of scandals at its parent bank. Why increase a fee for the most lucrative, largest financial advisors when the firm's model is to focus on and build that part of the franchise, several industry industry executives asked.

But the increase in the so-called platform fee will provide support to advisors at Wells Fargo Advisors Financial Network, known as FiNet, according to the company.

One industry source called the move a "minor change" for the advisors at FiNet, who take home a greater percentage of each dollar of revenue they generate because they work as independent contractors using Wells Fargo's platform and not as traditional employee brokers. The firm is erasing an asset cap of $500 million on the platform fee, so advisors with more assets will have to pay that fee on their assets exceeding the cap in 2024.

"There will be a small fee increase for those practices," said the source, who spoke confidentially because of the sensitivity of the matter. "Wells Fargo had already telegraphed it, so it's no surprise."

And the platform fee increase is small, less than one basis point annually, according to the company.

"For the first time in four years, we made an adjustment by removing our platform fee asset cap for practices over $500 million in assets," John Tyers, head of the independent advisor group at the firm, wrote in an email. "The fee for assets over $500 million equates to $25,000 per billion in assets.”

At the end of last year, Wells Fargo Advisors reported a financial advisor head count of 12,027, or roughly 3,000 less than in 2016, when the news first hit that Wells Fargo bank employees had secretly created millions of unauthorized accounts in the names of customers without their consent. The bank was fined $185 million and then-CEO John Stumpf resigned abruptly.

Since 2019, the bank has been overhauling its wealth management business, jettisoning noncore operations like its overseas client operations and rebranding its private bank, and focusing on overhauling management and better retaining its wealth management advisors. Many of those advisors have been eying FiNet, where they work with greater autonomy and receive a more generous percentage of the revenue, but also shoulder more of the expenses as an independent contractor.

Last year, Wells Fargo rolled out a special bonus for advisors who were employees and wanted to move to its independent contractor brokerage so those advisors wouldn't lose deferred compensation. The change appears to have worked; in 2022, 324 financial advisors moved from Wells Fargo Clearing Services, the firm's main broker-dealer, to FiNet, according to InvestmentNews data, while 273 made that change in the first half of this year alone.

Wells Fargo Advisors is unique among its wirehouse bank competitors in offering an independent advisors channel for its advisors.

What's not clear is how many FiNet advisors will feel the sting of the fee increase.

The majority of practices will not see a change to their platform fee, according to the company.

“Consistency in the FiNet pricing schedule is important to us, and the 2024 grid remains unchanged," Tyers wrote in the email. "Our top payout remains 92% of gross production."

"With continued investments in our platform and service offering, our largest practices have been growing at an accelerated pace," he added. "This adjustment will allow us to continue to provide them the support they need. We believe the FiNet licensee pricing schedule remains highly competitive."

[More: Fed cap on Wells Fargo assets will cause pain eventually, Scharf says]