Wells Publishes 2020 Payout Plan for Independent Brokers

6 Dec    Investing News

(Clarifies in fifth paragraph that platform fees are marginal, with no charges on assets over $500 million.)

Wells Fargo Advisors will pay high-producing independent contractors in its Financial Network (FiNet) between 85% and 92% of revenue they produce in 2020, according to a pricing plan summary the firm released on Thursday.

The compensation plan is anchored by a single revenue payout grid tied to advisors’ overall practices rather than to each individual. It simplifies FiNet’s former use of two grids—one for individual advisers and another for the entire practice. The change is “net neutral” for Wells Fargo Advisors, but in “leveraging” the grid it scales the base payout upward to 85% from 70% previously, a spokeswoman said.

The payout on gross revenue, which applies to advisors who produce at least $500,000 in 2019, far exceeds what brokers who are full employees of their firms receive. At UBS, for example, the grid rate ranges from 28% to 50%, based on production levels.

Independent contractors, to be sure, pick up the tab for a range of product, servicing, technology and other support fees that Wells provides.

Platform fees at Finet in 2020 will range from 6 basis points on the first $30 million of customer assets kept at its broker-dealer to a marginal rate of zero on assets above $500 million. The platform fees consolidate administrative, clearing and execution charges across a practice’s complete book.

In prior plans, fee-based administrative charges were applied at the account level while clearing and execution charges were activity-based, the spokeswoman said.

The summary did not break out the myriad fees that independent brokers are charged for things like errors and omissions insurance, cybersecurity and risk management protections, fidelity bonds, technology and marketing and operational support.

The revenue grid summary highlights three levels of compensation that bring the largest gains to practices that grow the most.

Practices that produced $500,000 to $999,000 will keep 85% of their production before expenses. Those who generated $1 million to $5.99 million in 2019 will pocket 86% to 91% of the amount pre-expense, while the 92% top rate will be paid to brokers who produced $6 million or more in fees, commissions and other customer charges.

The platform fee range has eight breakpoints, sandwiched by the 6 basis-point-of-assets at the low end and the zero charges for those producing $500-million and above. In the $30 million-to-$50 million range, for example, Wells collects five-to-six points from brokers. Its take falls to 1-to-2 points of assets at the $250 million to $499 million tier.

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