For 2021, Wells Fargo Advisors has boosted by $1,000 the monthly revenue hurdle that its brokers must reach before they receive a higher payout rate, the wirehouse disclosed Thursday.
It marks the first time the firm has changed the hurdle since 2014.
Also in 2021, WFA Private Client Group brokers, who number about 10,000, will see their payout level rise from a base of 22% to 50% if they meet the new monthly hurdle of total fees and commissions of $12,500-$14,250, which is up from $11,500-$13,250 this year. (Exact payouts depend on the achievement of key production and client-centric goals, according to the Wells Fargo.)
Meanwhile, brokers with less than $300,000 in the most recent trailing 12-month period and eight years or more in the industry “will have a calculated grid rate of 19% applied to eligible revenue up to the hurdle and a 47% rate applied to eligible revenue above the monthly hurdle,” the firm said.
However, the firm also added two new deferred compensation opportunities for brokers, Warren Terry, managing director of Wells Fargo Advisors, pointed out to ThinkAdvisor on Friday.
Brokers can now also qualify for deferred bonuses if they increase annual net asset flows from clients by a minimum of $2 million and reach full balance sheet sales goals including loans and other bank products, according to the firm.
The maximum net asset flow amount will be $250,000, while the maximum full balance sheet amount will be $100,000, it said.
The overall 2021 comp plan has been “well-received” by advisors and is “very well-balanced,” Richard Getzoff, head of Branch Network at Wells Fargo Advisors, told ThinkAdvisor on Friday.
As usual, the firm looks at compensation and strike a balance the firm’s “strategic priorities” with “major industry trends” and the investments it makes in its programs that are “all aligned around the client,” he said.
Commenting on Wells Fargo’s 2021 comp plan Friday, Andy Tasnady, managing partner of Tasnady Associates, told ThinkAdvisor: “My read is it’s just a lot of refined tweaking. It’s not major at all. It’s very surgical.”
The “core adjustment” the firm made is the $1,000 increased hurdle, and that “haircut” won’t be a significant issue for Wells Fargo’s brokers, he said. For a $300,000 broker, “that’s about a 1% change,” but for a $900,000 broker, it’s only about a 1/3 of 1% “payout change — so it’s not that big of a ding for the average and larger-than-average” brokers, he said.
The firm is “shifting a little bit toward getting the message to be adding assets … and also focusing on the liability side — securities-based lending and mortgages, and they’re doing that through their deferred comp” with the two new bonus opportunities, he added.
Wells Fargo said earlier this year that, because of the pandemic, it was holding off on a plan to raise the client asset level at which an account fee was waived. It had said that, starting Sept. 1 this year, client households would need assets of $500,000 in their accounts to avoid fees that typically are as high as $300 per year; earlier, the asset level to avoid the charge was $250,000.
The firm’s 2020 compensation plan reduced payouts last year on client households with less than $250,000 in assets to 20%. Previously, that payout level applied to households under $100,000.
Rivals’ Comp Changes
About one week before Wells Fargo’s disclosure Thursday, Merrill Lynch disclosed it eliminated pay to advisors on all client household accounts under $250,000, but left its core incentive compensation grid intact for 2021, while making minor tweaks to its team grid program. Performance hurdles for its growth grid, meanwhile, will remain at the same levels introduced in mid-2020, Merrill said.
Rival Morgan Stanley hasn’t announced its 2021 comp plan yet. It had said in March it was delaying an important change to its compensation plans until October. The change, involving a jump in the levels of yearly fees and commissions under $5 million used as thresholds in the incentive comp grid, had been set to start April 1. In May, UBS joined other wirehouses and pushed back the start of changes to grid payouts due to the pandemic.
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