Wells teams that manage to increase their books by that much in a given year will be in for a noteworthy payoff. Namely, they'll be able to keep half of all the commissions and fees they generate for the firm.
But if they fall short of that mark or other criteria, they'll get to start keeping half of what they generate only for monthly revenues in excess of $13,500. For anything less than that, the payout rate will be 22%.
Michael King, an industry recruiter and the president of New York-based Michael King Associates, said Wells Fargo is wise to be setting a clear benchmark for obtaining higher pay. He predicted the change will aid in Wells Fargo's efforts to
"I hope other firms will look at that and make changes accordingly because a lot of people still want to go independent, and people are going independent every day," King said.
The growth compensation policy will be on offer only to top producers. Wells defines those as individual advisors who generate $2 million or more a year in revenue — or teams that do $800,000 on average for each member. Up to now, such advisors and groups had to increase their annual revenue by about 10% to be able to keep half of all the commissions and fees they generated.
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Starting the year with $2 million in additional new assets is only one way Wells advisors and teams can now receive the higher payout rate. They can also qualify if they come into Jan. 1 with a $150,000 bump in revenues, or if they hit various benchmarks throughout the year. They'll meet the criteria, for instance, if they can manage $500,000 in new assets by March of the new year, $1 million by June or $1.5 million by September.
The $2 million net new asset target was likely the biggest change that Wells Fargo announced Tuesday to its pay policies for its roughly 8,000 advisors. Otherwise, Wells Fargo's compensation policies will largely remain unchanged in 2024.
Sol Gindi, the head of Wells Fargo Advisors, noted that central aspects of the grid have remained consistent for three years.
"We've made key simplifications over the last few cycles, and our advisors are feeling the improvement," he said in a statement.
Rick Rummage, who runs the recruiting firm The Rummage Group, agreed that Wells advisors are likely to welcome the consistency. Long-time employees are rarely ever happy to see big changes in their payment plans from one year to the next.
"Since we are going into a possible recession, that tends to make advisors look around more for other opportunities," Rummage said. "That's when the last thing you want to do is make any instrumental changes to compensation to give them reason to start looking early."
Wells did furnish an example of what the new compensation policy for growing advisory teams could mean for top producers at the firm. One recipe for success, according to the firm: add $5 million in new client assets, set clients up with $2 million in new loans and broker $500,000 in alternative investments.
Top-end advisors who can do that will make $576,096 next year. Those who don't will make $468,965. The difference? About $107,000.
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Roger Gershman, the CEO of the recruiting firm Gershman Group, said Wells remains an industry leader with its pay policies.
"Their comp grid is one of the highest in the industry for top teams," he said.
Wells also tends to pay advisors the bulk of what they've earned upfront in cash and minimize the use of deferred payments. In the previous example, the team that makes $576,096 by hitting certain benchmarks would receive $530,000 in upfront cash. Only about $46,000 would be deferred.
"People like to have the money as soon as they make it," King said. "So that's a big positive."
But Wells' policy changes won't just make it easier for top advisory teams to qualify for its "growth" incentives. They'll also tighten the screws a bit on low producers.
Teams that have been in the industry for more than eight years and have less than $300,000 will still have an incentive to bring in more than $13,500 in new revenue in any given month next year.
But if they do, their payout will be only 30% of the total haul. That rate is down from 47% this year.
For revenue below that $13,500 monthly threshold, the payout will be 15%. That's down from 19% this year.
The other pay policy changes Wells announced Tuesday are relatively minor in scope. Many advisors, for instance, will receive an increase in their expense allowances. Advisors with $550,000 in revenue in 2023 will receive an allowance of $1,250; those $1 million will get $9,000; and those with $1.5 million will get $15,000.
