(Corrects paragraph 15 to add dropped word "not")
NEW YORK Dec 19 Wells Fargo Advisors outlined
its 2014 compensation plan for retail brokers on Thursday,
dramatically increasing the deferred compensation brokers can
receive for meeting revenue goals, making more brokers eligible
for expense accounts and tinkering with their monthly revenue
Wells, the third largest U.S. brokerage firm with about
11,000 branch-based advisers, is the last of the big U.S. firms
to spell out pay plans that influence how their brokers conduct
sales and money-gathering efforts in the coming year.
Morgan Stanley, Bank of America Corp's
Merrill Lynch and UBS AG's U.S. brokerage unit
unveiled plans two weeks ago that reward asset gathering,
encourage brokers to work in teams and toughened revenue targets
for lower-tier advisers.
Wells has picked up on those trends, with twists.
Several brokers said the deferred bonus targets are
considerably higher than expected.
Brokers with annual revenue of $300,000 to $500,000 can earn
deferred cash of as much as 8.25 percent of that total, up from
2 percent, if they meet one of four targets tied to metrics such
as new client assets, loans and writing financial plans this
year. Brokers who bring in $2.1 million or more can get 11
percent of the total, up from 8.5 percent.
The bonus potential, and Wells' decision to remove caps on
the amount, puts the deferred bonus awards "into orbit," said
"I listened to where the pain points were," David Kowach,
president of Well's branch-based private client group said in
explaining how the changes can help both top and lower-tier
advisers. The deferred compensation presents the "biggest
opportunity" for brokers and their managers, he added.
Wall Street has been steadily raising deferred compensation,
seeing it as a way to delay immediate cash payouts and to lock
in employees who might be tempted to jump to rival firms. Wells
requires brokers to remain at least five years to collect their
However, Danny Sarch, a headhunter for brokers, said firms
are getting more generous with the potential awards because many
brokers do not stick around for the delayed payout.
Wells Fargo Advisors also adjusted its core payment plan.
Unlike rivals that pay brokers a flat percentage of the fees and
commissions they produce, the Wells Fargo & Co
subsidiary has a two-tier system that currently pays all brokers
22 percent of the first $12,000 they bring in every month and 50
percent on anything earned above that.
In past years, Wells has raised the hurdle for the higher
payout by $1,000 with each new pay plan. That "tax" is no longer
in effect, Kowach said.
In 2014, there will be three hurdles to the higher payout.
Low-producing brokers will have to breach $13,250 each month
before they graduate to a 50 percent payout. Mid-level ones must
wait until they hit $12,500. Top-producing brokers, however, hit
the 50 percent hurdle at $11,500, down from $12,000 this year.
Most of Wells' cash incentives-immediate and deferred-are
tied to hitting targets related to improved revenue, creation of
financial plans for clients and growth of wealthy households.
Kowach said that, unlike most of Wells' rivals, the firm
this year is not gearing its bonuses to fee-based, rather than
"Transactional business is half of our revenue and
represents most of our client assets," Kowach said. "I want our
people to do great business and help clients win regardless of
the compensation model."
Most brokerage firms have skewed bonuses in recent years to
fee-based accounts that generate revenue year-to-year,
regardless of how often clients trade. Commission accounts tend
to veer wildly as clients make trades in rising markets and
withhold transactions when markets fall.
In other enhancements, Wells is giving more brokers expense
accounts to entertain clients and prospects in 2014, including a
token $500 amount to those who produce $300,000 to $500,000 and
did not previously qualify. Top-tier brokers can get $15,000
Like its rivals, Wells also has added incentives for
advisers who work on teams, and has simplified penalties for
brokers who discount commissions from its published price.
Wells also addressed its "aging broker" issue with an
enhanced road-to-retirement program. The average age of a Wells
broker is 56, and many are having a hard time finding younger
brokers in their branches that they trust to take over their
"books." In 2014, Wells will let them search wider for a
successor within their geographic regions. It also has developed
a valuation analysis that lets retirees sell their practice for
as much as 1.6 times the revenue they produced in the previous
12 months. Older brokers also can remain at the firm for five
years, up from three, after announcing their retirement plans as
the firm looks for way to help them pass clients to younger
(Reporting By Jed Horowitz. Editing by Andre Grenon)