Wells Fargo Advisors’ market leaders and branch managers could face steep pay cuts next year if they lose brokers or fail to bring in new ones as the firm digs in on an aggressive retention and recruiting strategy and seeks to turn around years of attrition, according to sources with direct knowledge of the changes.
As part of its 2022 update to manager compensation, Wells will adjust the criteria for receiving a key element of their annual bonus called the Performance Award to more directly penalize for drops in headcount, according to current and former managers familiar with the plan. The award, which had been based in part on net revenue growth, will next year instead include gross retention and recruiting with all arrivals and departures counting the same regardless of their years of experience or revenue, they said.
One Wells market leader, speaking on condition of anonymity, said he could see up to a 45% reduction to his performance award if he did not bring in a recruit and lost brokers. That compares to what he estimated would be a 10-15% hit at the extreme end for lost revenue under the current plan. (While the percentage breakdown varies from manager to manager, most compensation packages are around 40% salary and 60% bonus, according to the same market leader.)
The new stick is among many carrots that Wells has added for managers and external recruiters to help it rebuild as its sales force has fallen to 12,552, down 9% from the prior year and 17% from over 15,000 in 2016 when its parent bank’s fake account scandal came to light. It comes as Wells also announced earlier this month it would be sweetening pay for its core private client group brokers next year.
The plan was rolled out in recent weeks to about 70 market managers who oversee the field of hundreds of branch managers, according to the sources.
“Managers and leaders are responsible for growing the business across both Wells Fargo Advisors and The Private Bank,” Wells Fargo spokeswoman Shea Leordeanu wrote in an emailed statement. “Their compensation plans fully align with [the Wealth & Investment Management division’s] business objectives, while effectively managing risk.”
Leordeanu declined to confirm the specific figures cited by the manager but noted that the recruiting and retention factors were two of four to be included in next year’s performance award, which will also measure net asset flow and lending growth.
While sources said net trailing-12 revenue had served as something of a proxy for headcount in previous years’ award, the change appeared to be a direct effort aimed at focusing on filling seats as the firm was becoming more averse to declines. Under the current net revenue measure, managers had been able to offset smaller departures with a single large hire during the year.
“Now, the firm’s position is if your headcount is negative–and that headcount includes trainees, underperformers, whoever it might be and regardless of how much or how little revenue they do–if more people leave the firm than you successfully bring in, then your compensation is going to be negatively impacted,” the current manager said.
Wells is also reining in a separate recruiting bonus it had paid managers and will make positive recruiting and retention a condition to receive the full amount. Managers were able to receive up to 8% of a successful candidate’s trailing-12 revenue, but next year will receive 4% upfront and an additional 4% only if they achieve positive headcount growth, according to the market leader.
In their favor, the wirehouse also told managers it will not penalize them next year for brokers who leave a private client group branch but stay in the Wells system by moving to its Financial Network independent unit, the sources said. While the move was a relatively small tweak, it was “definitely good news,” the current manager said.
A former Wells manager, who also spoke on condition of anonymity because he did not have permission from his current employer, noted that while the compensation cuts could be steep for underperformers, the plan overall still includes a number of above-market rewards for those who are growing their market.
“The firm is basically saying, ‘Listen, we’re gonna cut your top if you’re not growing, but if you are hiring, we’re going to pay pretty well,’” the former executive said.
Original Article: Advisor Hub