For the first time since 2014, Wells Fargo Advisors is increasing the dollar amount of revenue a financial adviser must produce to get a higher payout, meaning advisers could see a slight decrease in monthly compensation in 2021.
The pay change is being unveiled today to Wells Fargo Advisors' 12,908 reps and advisers and will take effect next month. The wirehouse is raising the minimum revenue amount, known as a hurdle in industry parlance, by $1,000 each month. Above that, advisers will receive a payout of 50% of fees and commissions charged to customers. Below the hurdle, the payout is just 22%.
Those two rates, the percentage of revenue advisers are paid above and below the hurdle, are not changing. What's changing, according to Wells Fargo executives, is the amount of revenue advisers must generate each month to get the more lucrative, 50% payout.
In 2021, the new monthly target or hurdle will range from $12,500 to $14,250. Over the past several years, it was $11,500 to $13,250.
For an adviser generating $1 million in annual fees and commissions, that translates into an annual pay decrease of $3,300, or $275 per month, noted Rich Getzoff, head of branch network, in an interview Thursday morning.
While the firm is raising the hurdle, which could pinch an adviser's monthly pay, Getzoff added that it is also increasing business opportunities for advisers in other parts of next year's pay plan, or grid as it is commonly referred to in the securities industry.
"In its entirety, the comp plan is competitive," Getzoff said.
A year ago, Wells Fargo Advisors for the most part left its pay plan for advisers alone but in early 2019 introduced a new succession plan, called the Summit Program, that ties advisers more closely to the firm.
One sweetener for advisers in next year's pay plan is the expansion of that program, Getzoff said. Wells Fargo will offer financing to young advisers to purchase the practices of senior advisers looking towards retirement for two such transactions. Up to now, the wirehouse was putting capital behind only one such deal.
Younger advisers "can buy the books of business of more than one adviser," Getzoff said. "Is that a pay cut? No. It's an investment in priorities."
Next year's grid also enhances compensation for financial advisers on teams and expands opportunities for advisers' deferred compensation, including net asset flows and the clients' total balance sheet, which includes lending.
Wells Fargo has reportedly begun cutting hundreds of jobs at the bank to trim costs during the COVID-19 pandemic amid a slump in profits. In October, the wirehouse confirmed it was also laying off a group of advisers who are paid a salary and bonus. Laying off advisers is a rarity in the wealth management business as their jobs is to drive growth of revenues.
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