Wells Fargo wealth management earnings rise in 2022

Wells Fargo stems steep advisor losses after a massive outflow

January 18, 2023 5:13 PM

In the last three months of 2022, Wells Fargo added to its headcount of financial advisors for the first time all year.

The bank's modest gain of 16 financial and wealth advisors in the fourth quarter as compared to the prior period left just over 12,000 in Wells Fargo's Wealth and Investment Management segment, according to the firm's Jan. 13 earnings statement and a call with analysts. The slight reversal of a years-long trend toward shrinking headcounts highlighted a very profitable year for the company's wealth arm, which is benefiting from rising interest rates.

"We continue to have strong momentum attracting the best and most talented advisors in the business and attrition continues to drop," Wells Fargo spokeswoman Shea Leordeanu said in a statement. "Advisors recognize that Wells Fargo Wealth and Investment Management enables them to deliver a superior level of service, support, and advice to all their clients."

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For the key wealth management takeaways from Wells Fargo's fourth-quarter earnings, scroll down the slideshow. Click here to view coverage of the bank's rising expenses and here for a report on the employee headcounts at Wells Fargo, JPMorgan Chase and Bank of America. And, for a look at Wells Fargo's third-quarter wealth earnings, follow this link.

Note: Unless otherwise noted, all metrics below refer to Wells Fargo's Wealth and Investment Management segment, which is the home of Wells Fargo Advisors, Wells Fargo Advisors Financial Network, Wells Fargo's private bank and its custodian. The company doesn't break out metrics specific to those parts of its business.

Financial advisor headcount

The financial and wealth advisor headcount at Wells Fargo Advisors dropped by a net 340 registered representatives, or 3%, year over year to 12,027 in 2022. That net loss of hundreds of representatives was a fraction of the 8% dropoff of 1,146 advisors in 2021 and decline of 6%, or 901 brokers, in 2020.

Financial advisor production

Despite challenging economic conditions with slumping stocks and bonds, advisor productivity keeps climbing at Wells Fargo. Average revenue per advisor for the full year jumped 9% in 2022 to more than $1.2 million. In prepared remarks, Chief Financial Officer Michael Santomassimo pointed out that the wealth and asset management unit's average loan volume ticked up 1% from the same period a year ago to $84.8 billion, even as demand for lending products has fallen amid the market volatility.

For the year, higher interest rates pushed the unit's net interest income up by 53% to $3.93 billion. Falling stock and bond values pushed down revenue from every other source of business.

Client assets

Market conditions put a major dent in the value of clients' assets last year. Advisory assets plummeted by 17% to $797 billion, brokerage holdings fell 13% to $1.06 trillion and total client assets plunged 15% to $1.86 trillion.

Last October, Wells Fargo launched a new service called Wells Fargo Premier designed to provide banking, lending, and investing to affluent clients. The service is "bringing together our branch-based and wealth-based businesses to provide a more comprehensive, relevant, and integrated offering for our clients," CEO Charles Scharf said. "We continue to enhance partnership within our commercial business to bring corporate investment banking products such as foreign exchange and M&A advisory services to our middle-market clients."

Expenses

The megabank's expense-cutting program, smaller advisor headcount and lower compensation tied to business metrics enabled the wealth unit to keep its costs in check last year. Noninterest expenses ticked down 1% in 2022 to $11.61 billion. Those lower expenses contrasted with the overall higher-than-expected costs stemming from the bank's ongoing legal and regulatory cases.

Earnings and revenue

For the year, Wells Fargo's wealth and asset management arm earned net income of $2.42 billion on revenue of $14.82 billion, for a return on allocated capital of 27.1%. Profits grew 19% from 2021, while revenue increased 3% and the return on allocated capital expanded by 4.5 percentage points. The boost came primarily from business tied to interest rates, which offset the impact of lower stock and bond values and clients seeking higher yields from cash holdings, the bank said.

Remark

As part of the ongoing expense-cutting program, the megabank has slashed about $7.5 billion from its gross expenses in the past two years and plans to find $3.2 billion worth of additional savings in 2023, according to Santomassimo. The company is already "seeing real sustainable revenue growth" and a greater "ability to invest" in additional areas from the cuts, Scharf told analysts.

"We still have higher headcount and higher expenses than people who are more complex than us," he said, according to a transcript of the call from FactSet's CallStreet. "Some of that is explained by the work that we're doing, the expenses and heads that are building out the control infrastructure, but there's a lot more beyond that. That's the work that we're doing to peel that back piece by piece by piece. We still have a huge amount of manual processes inside the company. We have duplicate systems, and that's the work that we're on."