Wells Fargo is seeking to make up for its advisor losses of the past year by rolling out an enticing compensation plan ahead of its wealth management rivals.
The San Francisco-based bank announced its 2023 financial advisor pay grids Tuesday, a month to six weeks ahead of when it used to roll them out.
"We have a plan that works, that we know our advisors like, and we want them to know we're sticking with it," Sol Gindi, head of Wells Fargo Advisors, said in an interview Tuesday.
Financial advisors often wait "with bated breath" for these plans to come out each year, Gindi said. The early rollout, in Wells' case its earliest ever, means "people can start planning for next year and not worry about any changes that are coming down the pike that would surprise them. You don't want any surprises."
Wells' 2023 pay grids largely maintain the features added in 2022, which included simplifying the number of thresholds, or "hurdles," to achieve higher levels of pay, and removing unpopular caps on pay. Every month, an advisor generates revenue from working with clients, typically from activities like charging them fees to manage assets or receiving the interest that a client pays on a loan they took out from the brokerage. At Wells, for the first $13,500 in monthly revenue, a financial advisor is paid 22% of that income in cash. Once they clear this amount, they get to take home 50% of every additional dollar earned — essentially splitting sales 50-50 with their employer. Gindi said that structure would remain in place for 2023.
"Last year, this was three separate hurdles with, like, seven different ways to qualify. It was overly complex with not a lot of benefit," Wes Egan, head of wealth and investment management human resources and advisor compensation, said in an interview. "We got a lot of mileage, a lot of positive feedback this year in simplifying and making it just one hurdle at $13,500."
Wells offers "enhanced compensation," rewarding individual high performers who have at least $2 million of trailing 12-month production, advisors who show strong improvement by growing revenue at least $150,000 year over year and teams that share at least 75% of total revenue among their advisors, where on average each advisor brings in at least $800,000. Qualifying advisors can get paid 50% on the dollar for all revenue they bring in without having to clear a $13,500 hurdle, and on teams, each advisor can get a $5,000 additional bonus to be paid as deferred compensation.
Deferred compensation is paid annually to each advisor and vests over five years, Egan said, to motivate continued growth. It is based on revenue, seniority for those who have worked at Wells at least 15 years and — for those who make at least $400,000 in revenue — net asset flows and growth in originating loans in securities and mortgages.
Gindi said advisors had been "worried" this year about getting enhanced compensation.
"With assets down and the market down, many of them have been challenged to grow their revenues," he said.
In response, the firm is offering "more ways to win," Gindi said, by bumping payouts to the 50% level if an advisor had net positive inflow of assets during the past month. This feature, which will be available to bank-based advisors as well as employee advisors, encourages them to keep bringing in more business and generating leads even as client assets, which compensation is usually based on, languish or decline in a down market.
The move comes as Wells Fargo overall grapples with continuing setbacks in the wake of several scandals over the past year that caused the bank to disclose a $2.2 billion
Wells had a rocky start to the year with its advisor headcount, which shrank in both the
However, it improved advisor recruitment in the
"We want to grow faster, and we think we've turned the corner," Gindi said.
He said Wells' breadth of resources as a leading commercial and retail bank, coupled with a variety of affiliation options and the improved pay grids, were key selling points that could attract advisors in this comeback.
Gindi added that since wealth firms' largest expense item is advisor compensation, employers trying to control their expenses for the following year have been trying to get it just right by constantly adjusting the thresholds for earning different amounts of pay — though it's a tactic that may end up hurting their bottom lines instead as talent flees.
"What that causes in the industry is a lot of changes in plans or a lot of little tweaks to plans that our advisors have told us drives them crazy and makes them unhappy," Gindi said of changing cash compensation grids, citing employee feedback he had received.
Keeping the pay structure simple is key to appealing to talent, both outside advisors and those already working at Wells, Gindi said.
"They want to think about growing their business," he said of advisors. "They don't want to think about how it's all going to work in a compensation plan. It's too complicated."
Mark Elzweig, who runs an executive search firm in the industry, called the new compensation grids "a payout schedule with lots of carrots but no real sticks."
Elzweig, who includes Wells among his clients, said in an email that the changes overall, especially continuing to keep the simplified one-time hurdle of clearing $13,500 in production to attain higher pay, should aid Wells in its recruiting efforts. He also noted that "deferred compensation at Wells Fargo can be very substantial."
"Payouts are better and more motivating when they are clear and easy to understand," he said. "Skills in higher mathematics shouldn't be required to decipher one."
