Wells Fargo's independent broker-dealer is boosting recruiting efforts by looking in an unusual direction: inward.
The firm had been encouraging its advisors to recruit advisors into their practices from competing firms, a key factor in the IBD's recent growth, according to executives. But now, Wells Fargo may further boost that growth by breaking down barriers for its own employee advisors who want to jump channels.
"We feel that we have the best IBD on the Street. If they are interested in independence, we want to make sure they are talking to the home team," Kent Christian, president of Wells Fargo Advisors Financial Network, tells Financial Planning.
Previously, Wells Fargo charged employee advisors transitioning into its independent channel 15% of revenue their first year and 10% the second. Those fees are going away entirely, Christian says.
It isn't clear how many brokers were previously deterred from switching channels within Wells Fargo, but about 40 Wells Fargo advisors usually make the switch each year. The firm's independent arm has approximately 1,400 advisors, according to a company spokesman.
But the overall trends in the industry are undeniable. In recent years, more and more wirehouse advisors have been opting to go independent. Wells Fargo has suffered such losses, and the bank's policy change may help keep some of those assets in place.
"If they really want to go independent, then we feel the best place is FiNet," Christian says, using the firm’s nickname for its independent channel. "We want that the number of advisors who go leave our firm and go independent elsewhere to be zero."
The move to ease the movement of advisors from one channel to another will also build on strong growth the IBD has already experienced. FiNet had approximately $105 billion in AUM at the end of 2017, up from $96 billion for the prior year and $52 billion for 2011, according to a company spokesman.
A significant portion of its recruiting success has come from existing practices, which have brought in new team members, according to Wells Fargo executives.
Executives attribute this in part to additional resources they've put in the hands of FiNet advisors. In late 2014, for example, the firm started a program called “recruiting in a box,” which was intended to provide existing independent advisors with tools to help them find and onboard advisors into their practices.
Last year, about 50% of new recruits joined an existing FiNet practice, up from 20% in 2014, according to Alex David, head of the firm's branch development group.
"When that advisor comes in, they don't have to build it on their own. They come into an existing office and staff," David says.
The program originated in part, he adds, from FiNet advisors themselves, who were attempting to grow through new channels.
Looking ahead, there appear to be several tailwinds for the firm's growth. Wells Fargo executives note the longstanding trend of wirehouse advisors going independent for what they perceive to be greater freedom (the majority of the FiNet's recruits come from full service firms). The new tax law, signed by President Trump in December, may also offer more tax advantages to owning one's practice compared to being an employee advisor.
Some industry insiders have expressed concern that the Broker Protocol's potential collapse could stifle recruiting efforts. But Wells Fargo executives do not share those concerns, noting that they have years of experience transitioning advisors from non-protocol firms.
"Those advisors come over and they bring their assets, land safely and grow quickly," David says.
He adds: "For us, it's not even a blip."