Wells Fargo recently announced a new recruiter incentive commission to any recruiters that refer advisors to Wells Fargo. Historically, the industry standard for a fee paid to a recruiter is typically 6% of the advisors trailing twelve months of production. Wells Fargo is offering an aggressive enhanced incentive of 10% to recruiters who are willing to introduce recruits to Wells Fargo.
Clearly, based on the message this new commission rate is telling, Wells is having a difficult time acquiring recruits. The most obvious reasoning is due to the almost daily waves of poor press they are receiving, including most recently the potential $1 billion fine for mortgage and auto business misdeeds. Wells Fargo’s own data shows a downward trend with 145 advisors departing the firm in the first quarter. Additionally, Wells Fargo total advisor head count is down 2% in the first quarter when compared to the same period last year. Moving firms is challenging enough without having to decide whether you want to move to a firm that has been routinely on the bad-side of news every day.
This effort to offer enhanced fees to recruiters suggests to me that even their competitive recruiting deals are not enough to persuade quality advisors to join Wells Fargo in any of their wealth management channels. In financial advisor commission terms, this new Wells Fargo 10% recruiting fee, as well as the actual Wells Fargo transition deal, is liken to the outdated and shunned upon B-Share mutual fund that came with a big upfront commission to the advisor, but years of backend penalties if the client decided to get out of the fund family. Don’t get B-Shared by a Wells Fargo recruiter. To make matters worse, if Wells continues to have attrition problems and a lack of new practices joining, leaving protocol could very well be on the table.
So, buyer “advisor” beware…step gingerly when working with a recruiter who’s trying to convince you why Wells Fargo is “the place to be”. Don’t be pressured or lured by a high-pressure recruiter offering an aggressive Wells transition deal when Wells’ success given its current practices is questionable. If the recruiter you are working with is only talking to you about Wells Fargo, you may now know why. It could very well be that their advice is being bought by Wells Fargo and may not be in your best interest. It could also be that the recruiter you’re working with only works with Wells so they simply don’t know any better, and the advice they’re giving you is not only skewed by a high commission, but also flawed due to the lack of competitive knowledge.
A recruiter, and a true consultant, will have the ability to, and should always, present several options that best meet an advisor’s goals. A true consultant will be able to introduce advisor clients to any number of firms, all of which generally pay the consultant the same amount. By working with this type of consultant you can be assured that the advice your receiving is unbiased, from a financial point of view, and based on a broader knowledge of the competition, more in-depth and sound.
A side note to recruiters . . . recruiters beware of your reputation. If the advisor is going to a firm where the probability of frustrations is high, that advisor may never trust you again. All too often we speak with advisors who are being “helped” by a recruiter that clearly has one agenda…. The B-Share. In a profession that prides itself on giving the right advice where commissions should be a secondary factor, it is obvious Wells Fargo leadership has again miscalculated what the right thing to do is by creating the wrong incentives. This is the same behavior that has gotten them in trouble in the first place, and leading to all the bad press.
As a financial services professional for over 20+ years, I have seen or worked with almost every type of advisor practice. Over time, I have developed biases towards certain firms because of what I witness or experience through my interactions with senior leadership, hear directly from advisors at those firms, from advisor who left a given firm, and other industry research that verify various observations. Based on many of these factors, we provide guidance and advice to advisor based on what we truly believe is the right direction for our clients. For this reason, we implore our clients to not hold back when we are talking about their hopes, dreams, and goals for their practice during a transition. Our advice is only as good as the information we have to work with. So don’t hold back on what your true goals are for a move in the short-term and the long-term. The more information you can provide us, the better our advice will be.
For more information on Elite Consulting Partners, their complete suite of services, most recent moves, or strategic advice that can help you, visit www.eliteconsultingpartners.com.
