Wells Fargo stems tide of broker exodus
Wells Fargo's broker headcount snapped a three-quarter losing streak, rising by 37 advisors to 14,564 from the previous quarter, the company reported Friday.
The firm's wealth management unit, which includes employee and independent advisor arms, reported modest overall growth, with net income rising 5% year-over-year to $710 million.
The rise in headcount is partially due to an increase in trainee numbers as well as hiring experienced brokers, a spokeswoman said.
"Attracting the industry’s top talent will always be a priority for Wells Fargo Advisors, and we feel good about the quality recruits in our pipeline," the spokeswoman said.
Wells Fargo has pursued aggressive recruiting tactics this year, unlike its three wirehouse competitors. UBS announced hiring cutbacks in 2016. Morgan Stanley and Merrill Lynch followed suit earlier this year.
Wells Fargo's independent arm has picked up several new advisors, and the wirehouse also has had a few notable successes, including two Morgan Stanley advisors who oversaw more than $400 million in combined client assets.
It seems that a long bull market in transition deals may be coming to an end.
"It's always nice when one poker player folds and it's down to two or three players," one recruiter says.
The wirehouse's executives think they've struck on the right formula to boost growth through a simplified comp plan, greater autonomy and an attractive retirement package.
But Wells Fargo has been plagued by a fake account scandal among other issues, damaging its brand in the eyes of advisors, recruiters say.
Even though headcount rose from the prior quarter it was down 3% year-over-year. The company's advisor ranks fell by more than 500 from the third quarter of 2016 through the second quarter of this year.
That broker exodus was a shift from years past, when advisors perceived Wells Fargo's brand coming out of the financial crisis to be stronger than that of their Wall Street competitors, recruiter Danny Sarch says.
"The thing that kept them in their seat for years was the quality of the brand and reputation. With that gone there is little to keep them," Sarch says.
In contrast, regional firms such as Janney Montgomery Scott and RBC have been successfully courting wirehouse brokers. Janney said it netted about two dozen advisors managing $2.2 billion during the third quarter.
Favorable market conditions and positive flows helped boost Wells Fargo’s assets, which grew 8% year-over-year to reach a record $1.9 trillion.
That growth mirrored a similar increase at Bank of America, which reported Friday that client balances for its Merrill Lynch business reached a record $2.25 trillion, up 7.5% from the same period a year ago.
Wells Fargo's wealth management unit reported that revenue grew 3.5% to reach $4.2 billion. That growth was boosted by a strong increase in net interest income, which rose 19% to $1.1 billion.
Noninterest expenses increased 4% to $3.1 billion.