Wells Fargo Advisors capped off 2014 with relatively strong numbers, as fourth-quarter earnings at its wealth division were up 5% year over year, despite costly investments in technology and higher broker commissions,
the firm said Wednesday.
The wealth, brokerage and retirement unit, which includes both employee and independent adviser channels, managed to produce profit of $514 million for the quarter, up from $491 million a year earlier. Revenue rose 6% year over year, to $3.6 billion. Executives attributed the revenue growth to an increase in asset-based fees, a result of the firm's “strategic initiative” to focus on financial planning, which provides more stable returns.
“The growth in fee income was driven by a 12% increase in asset-based fees as we continue to execute on our strategic initiative of focusing on plan-based relationships resulting in higher recurring revenue,” chief financial officer John Shrewsberry said on Wells' quarterly earnings call.
MANAGED ACCOUNTS UP
Managed account assets were up 13% year over year, to $423 million.
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The rising fees from the managed-account business helped to overcome a 6% yearly rise in expenses. The wealth unit spent more than $2.8 billion in the quarter, including a “higher profit spend for technology platform enhancements,” according to the earnings release. The firm spent much of last year converting advisers to its new SmartStation 2.0 platform and building out mobile technology.
Loan growth also
continued to trend upward. Average loans were up 13% year over year, to $54.8 billion, filliped primarily by nonconforming mortgage loans and securities-based lending, where clients can borrow against their portfolio.
Wells Fargo chief executive John Stumpf gave a nod to the brokerage unit during the conference call, saying the relationship between the community banking group and the wealth management division was “one of the biggest opportunities” for the firm to bring in outside assets to the bank.
“We have as many assets [held] away [by] customers who call us their bank as we do under management,” Mr. Stumpf said. “So the relationship and working together to bring those assets home, if you will, has been a big opportunity for us. Of all the opportunities we have at the company, of all the businesses, that is probably the biggest opportunity to jump a curve” in terms of incremental growth.
On average, Wells Fargo Advisors' clients were cross-sold 10.49 products from other divisions, versus 10.42 a year earlier.
Meanwhile, headcount
continued a downward trend, reaching 15,187 advisers in the fourth quarter, down 1% from the prior year. Wells Fargo does not break out the number of its traditional employee brokerage, which is about 11,000, from its banking and independent channels.
