John Peluso, president of Wells Fargo Advisors Financial Network, says the independent channel of Wells Fargo had a very good 2011, and he expects the group to have an even better 2012.
“In general, FiNet’s yearly growth target is to help FAs open up between 75 to 100 new practices a year. And we believe this is sustainable,” he said in a recent interview. “Including solo practitioners and teams, this entails about 140 to 200 advisors per year joining FiNet.”
An important trend, both he and experts say, is that larger teams have been exploring and moving to independence with higher yearly fees and commissions than in the past. “We should continue to see this trend and strong organic growth, i.e. same-store sales,” noted Peluso.
“We want mature business owners to join us, and we are best positioned to help them grow the business,” said the executive, who joined the industry in 1988 at Wheat First Securities. “We hope to grow in the double digits going forward, in terms of revenue.”
The average production of FiNet’s roughly 1,100 advisors is about $530,000, or $1.05 million per team. Prospective FiNet reps that Peluso and his colleagues are talking to these days are generating even greater production, he says.
“The pipeline is bigger and better in terms of independent reps and teams,” explained Peluso. “This started in the second half of 2011 and is continuing in the first half of 2012.”
Still, going independent is not for everyone, he admits, and that “is a long-term trend.” Nonetheless, there are probably three out of every 10 advisors exploring this option today vs. about 1 out of 10 in the past five to 10 years.
“Not all advisors are capable and want to run a small business,” shared Peluso. “FiNet is about making that move as simple as possible. There are myths in the marketplace [about going independent] and through a partnership with us, we demystify this process.”
The advantage FiNet offers, he notes, is that advisors have access to the resources of Wells Fargo: “We marry that with the advisor’s ability to own and operate his or her own business. This is what makes us attractive to reps.”
These are the pull factors. Push factors, Peluso shares, include events, like the ending of an advisor’s retention loans, changes in branch management and complexes, mergers & acquisition and integration. “When events happen in the industry, we want to be top of mind for advisors,” said the St. Louise-based executive.
As more time passes since the peak of the financial crisis, he explains, advisors “are gaining more confidence and are more likely to contemplate making a move.” About 70% of recruited FiNet advisors come from a wirehouse, 15% from other national firms and 15% from Wells Fargo’s private-client operations.
“I don’t see this changing much. It’s been a steady state for a while,” Peluso noted. “We are not right for all. But for those we are right for, we are spectacular, and they can’t wait to get here.”
Making the Jump
Gary Gould of Gould Capital LLC in Tacoma, Wash., came over to FiNet from Merrill Lynch a year ago. “We have about $140 million in assets and do about $1.8 million in production,” said Gould, who is joined in the practice by his father Charles and brother John.
The practice follows a “value-oriented model,” said Gould. It was started by his dad, who worked for Merrill for 37 years.
How long had the team been thinking about going independent? “Too long!” said Gould. “We first really looked at independence in 2002. And we made the transition roughly 10 years later.”
“It’s a long process that required a lot of patience on the part of our ultimate partner,” the advisor shared. “FiNet did really good job of hanging in there and providing us with the support we needed.”
The motivation for the switch, he explains, is that the team members found themselves “using less and less of the firm’s product and more of our own strategy … and we felt that the value we received vs. what we were giving to the firm was not there.”
The Gould team also felt that FiNet staff members were “honest, trustworthy and persistent in what they told us,” the advisor explained, “and there was no false information. That was important to us.”
In addition, the team wanted its clients to be comfortable about the platform it was transitioning to. “Having the Wells Fargo Advisors name and having the firm as a custodian, meant feeling comfortable,” said Gould.
As for why the advisors didn’t go the RIA route when moving to independence, Gould says that “solution would not have been as successful and would have been more difficult” for the family team.
Roughly 98% of the team’s clients moved with it. “Everything went as planned,” he added. “We are extremely excited to have our own name on the practice, and clients are thrilled.”
To help FiNet reinvigorate its growing performance on an ongoing basis, the Innovation and Growth Team, consisting of 16 executive-level managers, was introduced in 2011. The team is “focused on looking at ways to ensure business growth by designating a specific leadership team and resources for this goal,” said Peluso.
In parallel, Wells launched the Voluntary Growth Opportunity Award and is devoting more financial resources to this program in 2012, he adds. For instance, in the past these awards typically represented 1-4% of an advisor’s or a team’s annual production vs. current levels of 2-7%. “It’s an annual payment that comes out of FiNet earnings to be reinvested in the business for growth of local franchises,” explained Peluso.
To be eligible for the award, advisors and teams must hit certain targets of net new assets. “This is part of our quality hurdles, and there is also a scoring system tied to several best practices,” shared the FiNet executive. This includes having written investment plans for clients, using bank solutions, employing written continuity plans and taking other steps to build client loyalty.
Advisors who join FiNet by June 30 are eligible for the program in 2013. “It’s business as usual here,” shared Peluso. “We’re rather consistent in our approach and expect to open another 75-100 new businesses this year.”