Wells Fargo revealed changes to its compensation plan for next year, tweaking some core components and adding two new awards.
“We’ve really tried to meticulously balance our view of trends and priorities with the investments we make across the compensation plan,” says Rich Getzoff, head of branch network at Wells Fargo.
Under the new pay plan, which was unveiled Dec. 10, advisors at Wells Fargo will find new monthly revenue hurdles to meet, some deferred compensation changes and new opportunities to earn bonuses.
The changes will affect most of Wells Fargo’s nearly 13,000 advisors. Those in the firm’s private bank or independent broker-dealer units, for instance, are subject to different pay plans.
On the cash side of the comp plan, wirehouse advisors will still be paid on a two-tiered structure tied to three monthly hurdles that are themselves related to the revenue they generate.
The criteria for the hurdles remains essentially unchanged from prior years. The new wrinkle is that the hurdles themselves have increased by $1,000 to $12,500, $13,500 and $14,250, respectively. For revenue advisors generate below the threshold, they are paid at a 22% rate. Above it, and they are paid at a 50% rate.
The wirehouse last made changes to its hurdles in 2014, according to Getzoff. The pay rates have remained the same since 2011.
Where can a broker earn the most compensation?
On the deferred-compensation side of the plan, some advisors may have to work a little harder to earn the same pay.
Advisors at Wells Fargo are awarded deferred compensation based on a tiered structure related to the revenue they generate. Wells Fargo is increasing the thresholds between tiers by approximately 3%, though leaving the pay rates untouched.
For example: Under the 2020 comp plan, advisors generating between $635,000 and $885,000 in revenue can earn an extra 5% in pay, based on the revenue falling within that tier. Under next year’s plan, the threshold will be raised to $655,000 to $913,000 — meaning that an advisor who barely made the cutoff last year will have to generate higher revenue in 2021 to make the cut.
The threshold for the top tier for deferred compensation is now $6,574,000, whereas it stood at $6,380,000 under the previous comp plan. Advisors are paid at a 10% rate for revenue above the threshold.
“We expect to pay more overall under this plan than we did under the 2020 plan,” Getzoff says.
Balancing act
Wells Fargo’s 2021 comp plan continues to incentivize longevity among its FAs, who can still earn an extra 0.5% of total revenue if they generate $500,000 in annual revenue and have 15 years or more with the company.
As for new bonuses, Wells Fargo has introduced two awards related to net asset flows and balance sheet credits. For the former, advisors can earn an extra 20 basis points for net asset flows above $2 million; for example, an advisor who brings in $10 million of new business would earn an extra $16,000. The award maxes out at $250,000 in bonus pay.
“We believe this will lead toward [increased] net asset flows,” says Warren Terry, managing director of business performance at Wells Fargo.
To encourage advisors to work with both sides of a client’s balance sheet, the company is offering a new award under which an advisor can earn extra pay for helping clients with mortgages, home equity lines and so forth.
The wirehouse is also tweaking pay related to cash solutions for clients.
Under the plan’s five-tiered structure, advisors would get paid a percentage of what the firm terms full balance sheet credits. It starts at 60% for credits between $3,000 to $5,000 and rises to 100% for credits above $10,000. The maximum payout is $100,000.
The company also has raised the bar for advisors with low levels of production. Advisors with less than $300,000 in trailing 12-month production, and a tenure of eight years or more, will be subject to a pay rate of 19% applied to eligible revenue up to the monthly hurdle and a 47% rate above it.
The revenue bar was set at $250,000 under the previous plan.
‘An evolution’
Earlier this year,
“We’re resuming the original policy and not making further changes to it,” Terry says.
Wells Fargo also recently
Executives also say that a new advisor retirement pay plan has received a warm welcome among FAs. Wells Fargo, like other wealth managers, has an aging brokerage force and is striving to encourage succession planning.
“We see it as an evolution,” Getzoff says of the comp plan. “If you think about the value of advice, it lies in the $250,000 and above segment.” He notes that the firm has been targeting its strategy on those clients, particularly with an eye toward generational wealth transfer and serving both sides of a client’s balance sheet.
Wells Fargo’s comp plan announcement follows that of rival Merrill Lynch, which left its incentive pay grid untouched but cut payouts on small accounts. Under Merrill’s 2021 comp plan, advisors will get a 0% payout for production credits generated in households under $250,000. And production credit payouts on certain cash solutions are dropping to 2 basis points from 4 basis points — a sign of how record
Morgan Stanley and UBS have yet to reveal their comp plans for next year.
