January 5, 2010

Wells Fargo's New Deferred Comp: Tied to Net New Assets

Brokers with Wells Fargo Advisors' private client group can earn up to 2 percent of total sales in 2010 by meeting certain targets for net new client assets.

Wells Fargo Advisors has introduced the Net New Money program for 12,000 FAs in its private client group. For the program, FAs must meet certain asset levels per length of service in order to earn 2 percent of their yearly sales or production, according to Erik Karanik, managing director of branch incentives and cost management.

"We really wanted to have a component of our compensation plan that's not straight production- [or revenue-] based, and that's what the Net New Money program does," Karanik says.

The Net New Money deferred-compensation program requires that advisors with two to five years of experience bring in $500,000 in new assets in 2010; for those with six to 10 years of experience, the breakpoint is $750,000. FAs with roughly 11 to 15 years in the business must have $2 million of new assets, and those with more than 16 years in the field, need to top $3 million.

"The Net New Money award is about aligning the FA with the firm and clients in terms of either attracting new clients to Wells Fargo Advisors and the FA, or to garnering a greater share of wallet with existing clients," says Karanik.

Overall, FAs with Wells Fargo Advisors can earn up to eight percent of their annual sales or production in deferred compensation that should be granted in February 2011, vesting in five years (or early 2016). The deferred comp can be invested by FAs in funds now available through Wells Fargo's 401(k) plans.

In addition to the two percent that can be obtained through Net New Money, FAs can earn up to four percent through a base award tied specifically to production. Also, if an advisor has 70 percent or higher of total production in recurring revenue (i.e., fees), they advisor is entitled to another bonus of 2 percent of total production.

Wells Fargo Advisors' overall compensation and incentive plan gives advisors 24 percent of their first $10,000 in monthly revenue, or production, and 50 percent above that level. "It's very simple to understand and product neutral. This cash plan stacks up very nicely on a competitive basis," Karanik says. "Each incremental dollar [above $10,000] represents 50 cents in the pocket of the FA."

"We supplement it with our deferred compensation plan," he adds, "which is meant to be a wealth builder ... not a handcuff."

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