Wirehouse is seen as trying to shore up adviser ranks that took a hit after banking scandal
Wells Fargo Advisors decision to stay in the recruiting game and boost bonuses to recruits could give a needed lift to the brokerage, particularly as its advisers have spent the past nine months answering questions from clients about the banking scandal from last September.
That's when the brokerage parent company, the giant bank Wells Fargo & Co. was fined $185 million for creating hundreds of thousands of unauthorized deposit accounts and credit card accounts. Wells Fargo Advisors lost 400 advisers in the first quarter.
The move comes at a time when its rivals are retreating from the high stakes recruiting game. Morgan Stanley this week said it would reduce its recruiting efforts, and Merrill Lynch made a similar announcement earlier this month. Last year, UBS Wealth Management Americas announced a new adviser compensation plan and said it was going to cut back on recruiting by 40% and shift its focus to retaining top-producing advisers.
"Attracting the industry's top talent will always be a priority for Wells Fargo Advisors," said Wells Fargo spokeswoman Kim Yurkovich. "Adding great advisors and new clients has helped us grow in key markets."
Will Wells Fargo's strategy work?
"In the short term, perhaps Wells Fargo gets a leg up in recruiting because they are still willing to pay," said one Wells Fargo adviser who asked not to be named. "But, do advisers want to move to Wells after what happened at the bank nine months ago?"
"Wells Fargo is attempting to get brokers," said Michael King, an industry recruiter. "The firm has had some bad publicity and maybe some brokers were afraid to go there."
"This is not a one size fits all deal. It's based on the candidate," said Rick Peterson, another industry recruiter. "Wells Fargo is being very prescient. "The other three are out of it, at least temporarily. But I think this cease fire may last as long as a cup of coffee. But if brokers want to move this summer, the one large firm option is Wells Fargo."
The Wall Street Journal first reported Wells Fargo Advisors' decision to sweeten signing bonuses for veteran advisers. It's not clear what the exact increase will be, industry sources said.
For decades, recruiting large producing brokers or large teams of brokers has been the lifeblood of many retail brokerage firms. The downside for firms is the large expense that comes from huge signing bonuses, which traditionally have been two to three times a broker's annual revenue, known as gross dealer concession in the industry.
Wirehouses like Morgan Stanley and Merrill Lynch began pulling back from large compensation for recruits last October, when the Department of Labor issued guidance about its fiduciary rule for retirement accounts. Specifically, hiring incentives such as recruiting bonuses could be contrary to the rule because they can contain sales targets. Big firms almost immediately cut their bonuses to recruits.
