Wells Fargo shared its 2019 compensation grid and related details with its advisors this week.
Next year, registered reps who have been with the firm for at least seven years, but who fall below $250,000 in revenue for the prior 12 months, will see their pay rates fall to 19% from 22% for the base level of their monthly targets and to 47% from 50% of additional revenue.
“It’s not that onerous,” said Andy Tasnady of Tasnady Associates in an interview.
“Other wirehouses and some regional firms have penalty rates for longer-term reps of $300,000,” he explained. “It’s probably only a small percentage of advisors in the below-$250,000 range.”
Plus, the compensation consultant says, a decline of 3% is far less than drops some rival firms have made in recent years — which include going from 34% down to 20%, Tasnady says.
The Wells Fargo cut might represent a 15% cash reduction in some cases versus the 40% to 50% drop in cash that some other firms have made, he adds.
Can advisors can get around the $250,000 hurdle by joining a team?
Yes. “We believe teaming is great for supporting clients, and this would be an option for anyone to consider,” according to Rich Getzoff, Wells Fargo Advisors’ head of advisor-led business for the eastern regions.
For those with over seven years with WFA and about $200,000 in trailing 12-month fees and commissions, “You could contemplate trying to find a team and getting on it,” Tasnady said. That might make sense for someone who is “good at servicing clients but maybe not at adding new ones.”
There are different criteria that advisors on teams have to meet, according to the ’19 grid, such as having more than 75% of accounts top $250,000 in assets and having at least one advisor per team with more than $800,000 in revenue.
With a “team benefit payout” of 50% on all revenues, this might result in “a meaningful and big bump for someone near the $250,000 revenue level, who might only be getting about $85,000 pay on that … revenue [in 2018], but could get an extra $40,000 … and [then have] $125,000 in [total] pay” in 2019, if they satisfy the grid’s criteria, Tasnady explained.
Overall, he says, the objective of the ’19 comp plan “is to make the advisors work a bit harder, do a bit more prospecting to [raise] production.”
Those who aren’t so interested in making a revenue push or are thinking about retiring “might say, ‘It’s not worth it’” and depart, according to Tasnady.
Other industry watchers agree. “It will definitely cause attrition, but not the “regrettable attrition” you have when a big-producing advisor leaves, said Danny Sarch of Leitner Sarch Consulting in an interview.
“And it’s true that there are other firms that have been more draconian when it comes to these types of compensation grid changes, which all firms use it to drive behavior.”
The message with the 2019 WFA comp plan, Sarch says, is that maybe with many years in the business and under $250,000 in trailing 12-month production, “You shouldn’t be there — they don’t want you.”
In general, the recruiter “does not see attrition slowing down” at Wells Fargo. “Bodies went in motion months ago when the scandals hit.”
The number of financial advisors in Wells Fargo’s retail brokerage business was 14,074 as of Sept. 30 — down 490 from a year ago and 152 from the second quarter. Since Wells Fargo’s fake-accounts scandal began capturing headlines in September 2016, the number of advisors has declined by 1,012 — a drop of 7% from 15,086 two years ago.
“They may have a few good weeks without bad news,” Sarch said. “But I’m skeptical.”
In the past week, for instance, Raymond James and Ameriprise Financial said they had added ex-Wells Fargo advisors to their ranks.
A clearer picture of whether Wells Fargo’s attrition is truly slowing, he explains, won’t be known for another three to six months due to the time it takes for advisors to move from one firm to another.
His general take on the 2019 comp plan is that Wells Fargo “does not want to anger the larger producers, given the attrition of the past year or so. It’s minimal change.”
When it comes to comp grids across the industry, “I criticize all the firms. They have complicated this over the years, and that frustrates reps all the time — in terms of deferred compensation and bonuses, etc.,” Sarch said. “Advisors don’t like to have to work hard to figure out how they will get paid.”
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