Wells Fargo Advisor Headcount Down 3% in Aftermath of Bank Scandal
Wells Fargo & Co., which lost a net 204 retail brokers in the last three months of 2016, continued to bleed in this year’s first quarter as another 225 net brokers left the bank’s wealth and investment management division, the company said in announcing earnings on Thursday.
The departures followed disclosure of the San Francisco-based banking giant’s fake-account opening scandal in September that triggered congressional hearing, changes in top management and a $185 million settlement with regulators. Although Wells Fargo Advisors, the bank’s principal brokerage business, has not been implicated, managers and industry recruiters have said that retention and recruiting has been affected by the events.
A Wells Fargo Advisors spokeswoman declined to comment on the continuing outflow of brokers, which left the firm as of March 31 with 14,657 retail financial advisors across its employee and independent advisory channels, down 3% from 15,064 one year earlier.
In January, Wells attributed the fourth-quarter decline to an attractive succession planning program that prompted a high number of brokers to retire.
Wells offered a mixed report on how its wealth management bottom line has responded. Client retail brokerage assets rose 9% year-over-year, and 4% in the first quarter of 2017, to $1.6 trillion, driven primarily by higher markets and positive net flows, the bank said.
It also noted that the “cross-sell” culture that has been blamed in part for the sales practices scandal in Wells’s retail banking division is bearing fruit in wealth management. Referrals between the so-called community bank and the wealth and investment management division, which includes Wells Advisors and its private banking businesses, totaled $1 billion for the first since the month of the sale practices settlement.
“We’re pleased that the results from this important partnership have rebounded, which is an indication that our bankers and FAs are focused on meeting customers’ financial needs and that we’re competing successfully,” Wells Fargo’s chief executive Timothy Sloan said on an earnings call on Thursday.
First-quarter net income at Wealth and Investment Management, the smallest of Wells’ three business divisions, rose 22% to $623 million from the year-earlier period.
Total revenue of $4.19 billion was up 9% from $3.85 billion last March, reflecting a 14% jump in net interest income due to rising rates and increased lending and deposit taking in the wealth unit. Nonconforming mortgages generated by retail brokers lead to a 15% growth in average balances, the company said.
While advisory assets grew 14% in retail brokerage to $490 billion on higher market valuations and new money, money managed by Wells Fargo Asset Management for its wealth customers fell 12% from a year earlier to $195 billion. “[H]igher market valuations, positive fixed-income net flows and assets acquired during the prior years were offset by equity and money-market net outflows,” the company said in its earnings release.
The fallout from the scandal, meantime, continued in the first quarter. Wells this week said it would claw back another $75 million from former chairman and chief executive John Stumpf and retail banking head Carrie Tolstedt following an internal report on the high-pressure sales culture they generated. Wells last week agreed to who regulators said was wrongfully terminated after reporting ethical concerns to higher-ups.