September 19, 2023
Mindy Diamond Cited
by Miriam Rozen
Barry Sommers, the chief executive officer of Wells Fargo’s Wealth & Investment Management unit, didn’t skip a beat when a recruiter asked him if his firm offers advisors deals worth as much as 400% of their trailing-12 month production.
“We are regularly seeing other firms writing deals that start with a four handle, meaning four times trailing 12…Could you see yourself or have you been competitive to that degree for the right team?” industry recruiter Mindy Diamond asked during an audio interview with Sommers.
“Yes,” Sommers told her unequivocally.
“Look at our recent success,” Sommers told Diamond. “We could compete against anyone for the biggest, most sophisticated teams and we still on a regular basis hire $1-to-$3 million dollar producers.”
Sommers stressed several times that not only was Wells offering such competitive offers to teams making $2 million to $3 million but also to larger teams. “There’s no reason why a very large team wouldn’t get the same type of initial upfront package,” he said. “We don’t discount it because it’s a larger team.”
To be sure, the deals that Sommers and Diamond discussed were not simply 400% of trailing-12 revenue in cash up front but rather a mix that included hitting pre-agreed asset transfer hurdles. Still, that puts Wells at the high water mark of what aggressive recruiters such as now-defunct First Republic Bank offered to candidates with $10 million or more in revenue.
Wells Fargo last pushed the market higher with offers of 340% in 2021.
A Wells spokesperson when asked about Sommers’ comments said that he “was giving an example as our deals vary by channel and the advisor.”
Wells undertakes “a full due diligence” to evaluate if any advisor or team it’s considering offering a recruiting package will deliver a return to the bank, Sommers said. “The riskiest thing that we do everyday is attract people,” he said. “We have to make sure we hire the right people.”
The wealth unit CEO also claims that an advisor-attrition rate, which was “a major problem” for Wells five or six years ago, has dissipated. But he conceded that every player in the industry “is going to have a certain level of attrition.”
Wells has 12,000 advisors, Sommers said, which is the same size roster that the company reported at the end of 2022, after which it joined its wirehouse peers at Morgan Stanley and Bank of America’s Merrill Lynch in no longer reporting broker headcount.
Wells in 2016 tallied more than 15,000 brokers but has endured a consistent stream of departures since the parent bank’s fake account scandal came to light in the fall of that year.
The roster for Wells’ independent channel of advisors appears to be growing, since Sommers noted it has reached roughly 2,000, and it had around 1,300 almost three years ago. The firm began in 2022 promoting Wells Fargo Financial Network–FiNet–as a transfer option for Wells Private Client Group brokers. Earlier this year, company sources told AdvisorHub that the promotion had worked too well and a backlog, as long as 18 months existed, for brokers seeking to make that move.
In his conversation with Diamond, Sommers conceded there is “a bit of backlog” which his team has been addressing but said that it had never been as long as two years of waiting for eligible brokers.
Sommers also warned that recruits to the PCG unit couldn’t “come here and get a 400% check and move [to FiNet] the next day.” Those advisors have to wait for their recruiting deals to expire, he said.
But overall Sommers views the independent channel as the thriving channel for Wells and the industry in the future. “I do think that it’s the fastest growing channel over the last three, five years, and that migration will continue. And when it does, we’re in a great spot,” he said.
“For the traditional private client group advisors who are always here on the commission-based side, we don’t try to create obstacles to slow it down,” Sommers said about the transfers. “If it’s the right thing for them, it’s going to happen.”
He also acknowledged that Wells makes less money on brokers in the FiNet channel as compared to its private client group, but said it is better than having brokers leave the firm entirely.
“Remember, from my perspective, if we didn’t have that, they’ll go somewhere else,” Sommers said.
