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Wells Fargo Simplifies Comp Hurdles for 2022

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What You Need to Know

  • The number of comp hurdles that Private Client Group brokers must achieve for 2022 has been decreased to one from three.
  • The wirehouse has also enhanced the bonus opportunities for brokers.
  • The firm expects its brokers to welcome the simplified comp plan for next year.

Wells Fargo Advisors notified its Private Client Group and bank-based brokers that the firm has simplified compensation hurdles for 2022 while enhancing the bonus opportunities that the financial advisors can receive, the company announced Tuesday.

In PCG, brokers will each have one monthly hurdle of $13,500 starting next month. Under the new plan, they will each get the below-grid rate of 22% on the first $13,500 per month they make and then 50% “on everything over and above that,” according to Wes Egan, head of partnerships, teams, and succession planning.

That is much simpler than the current three hurdles of $12,500, $13,500, and $14,250 where “there’s a series of complex metrics that you need to achieve to qualify for one of those three hurdles,” Egan told ThinkAdvisor in a phone interview.

As of Sept. 30, Wells Fargo’s total number of financial and wealth advisors (including those in its independent channel) was 12,552, down 1,241 from a year earlier.

Wells Fargo expects the decrease to one hurdle “will be extremely well received” by brokers at the firm, Egan said.

There is also going to be an opportunity to have no hurdle at all in 2022. “For FAs who are doing $2 million and up who are growing at at least $150,000 per year or if they’re on a team sharing 75% of revenue, those FAs can now qualify for no hurdle at all,” he explained.

Brokers qualifying as members of a team will be eligible for an additional $5,000 per broker on the team, according to the firm. The $5,000 will be credited to the 2022 Deferred Compensation Award Opportunity and subject to applicable plan provisions including vesting requirements, it said.

“We think that gives us an extremely competitive cash compensation plan in our Private Client Group channel,” according to Egan.

The wirehouse’s bank-based brokers, meanwhile, will be “on a more traditional grid arrangement” that will be unchanged for 2022, he said.

But “we’re getting rid of the additional client-level adjustments that FAs in the bank channel receive,” he told ThinkAdvisor. Now, “when an advisor in the bank channel gets a referral from the bank, they have a 12-and-a-half-point deduction from their payout on that client for the first 12 months,” he explained.

In 2022, brokers will just be compensated under the grid plan, and “we’re not going to penalize advisors anymore when they get a referral from the consumer bank because we want them to get referrals from the consumer bank,” he explained, noting that’s the whole point of having brokers in that division.

There will also be a team comp opportunity for those on teams in which $1 million teams growing at a rate of at least $150,000 and sharing 75% of revenue would get paid at the rate of the highest-producing member of the team, he said, calling the new bank-based comp plan competitive, like the new PCG plan.

The deferred compensation plan will be the same for PCG and bank branch brokers, he went on to say. The revenue-based component rate maxes out at 7.5%. There is also up to a 50-basis-point loyalty award for brokers with Wells Fargo 15 years or more and doing over $500,000 in revenue per year, Egan noted, adding the combined plan will provide brokers with as much as 8% in deferred comp.

More on this topic

Wells Fargo is making a “huge investment” in its two growth-oriented awards, he also said, noting the firm added a new 50-basis-point tier and lifted the $250,000 cap so advisors will have “enormous awards for bringing in net asset flows.”

Overall Positive for Advisors

While the wirehouse “simplified the base hurdle options from three to just one, they now have several behavior-based options for added comp bonuses: a revenue growth hurdle, a net asset bonus, and a lending business enhancement,” Andy Tasnady, managing partner of Tasnady Associates, told ThinkAdvisor by email on Tuesday.

“Advisors are probably happy that they dropped client-sized bonus criteria from the list, as many advisors hate giving up any clients, even small ones, afraid that they might become a big client at some point,” according to Tasnady.

The company still has “rewards to entice advisors to do more of the types of business they want to promote (and believe is also good for the advisors’ success),” he added.

Agreeing, Mark Elzweig, president of Mark Elzweig Company, said, “Additional simplicity in a payout grid is always a welcome change. You shouldn’t need to be a math wiz to figure one of these things out. The asset awards will be well received by advisors too.”

Right now, “successful advisors are in critical short supply,” Elzweig added. “This year’s round of wirehouse payout tweaks reflects that reality by the absence of cuts to the grid and the inclusion of incentives for good producers.”

The 2022 Theme: ‘Simplification’

“We’re really proud of both of those channels and we really think that all of our FAs are going to be really happy this year about the changes we made,” John Alexander, head of Wells Fargo Wealth and Investment Management Divisional Network, told ThinkAdvisor.

“Our overall theme this year: No. 1 [is] simplification,” he said. “Then, No. 2, we’ve really got some outstanding upside opportunity for growth-oriented FAs. There are really strong plans for every single advisor. But for those who are really in growth mode, which really is most of our people now, there’s no other firm … that has a better plan.”

Explaining the reason behind its simplification for 2022, Alexander said, “One thing that we have heard from our advisors over the last few years is that our plan started out pretty simple years ago, but, over the years, it had just gotten way too complex. And we started hearing a fair amount from FAs, and so we really took that to heart and we listened to the feedback from the FAs.”

Wells Fargo is “focused on growing the Wealth & Investment Management business, which we’ll do by attracting and retaining the best advisors in the business, increasing net asset flows, and increasing lending balances,” according to Barry Sommers, WIM CEO at Wells Fargo.

“The 2022 advisor compensation plan has been streamlined and simplified and rewards those advisors focused on serving more of their clients’ needs and growing their practices,” Sommers said in a statement.

The firm’s total broker headcount as of the end of the third quarter was 12,552, down 2.1% from 12,819 at the end of Q2, the company said.

(Image: Bloomberg)