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 Wells Fargo, the fourth-biggest U.S. bank company, has told brokers
who sell investment plans and bankers who sell loans and mortgages
to refer clients with household assets of $2.5 million to each
other, down from $5 million when the partnership plan began two
years ago.
The change was rolled out nationally in the past few weeks because
of the program's success at the higher threshold, David Carroll,
head of Wells's Wealth, Brokerage & Retirement division said at a
bank analyst conference in Boston on Thursday. Wells has booked $1.7
billion of loans, $2.2 billion of new brokerage assets and $1.4
billion of trust assets since the partnership plan began.
"It is not an industry norm for traditional private bankers to play
nice with brokers, but we are making it work very well," Carroll
said.
By halving the wealth threshold, Wells nearly quadruples client
households eligible for referrals to 50,000 from 13,000 and doubles
to $300 billion potential brokerage assets now kept outside the
bank.
The number of brokers with upscale clients eligible for referrals
will jump to 8,200 from 5,800, and the number of advisers in the
program will likely rise to 900 from 500, according to slides
accompanying Carroll's presentation. On the flip side, only 11
percent of wealthy clients with Wells mortgages use the bank's
brokers and retirement advisers.
Brokers' resistance to selling jumbo mortgages and other bank
products has been narrowing. Many initially resisted handing clients
to bankers whose services might be less than premier, but interest
income and fees from selling bank products are so high that Wells,
Bank of America Corp, Morgan Stanley and UBS AG have rolled out
lucrative bonus plans to encourage sales and referrals at brokerage
units.
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More than 60 percent of Wells brokers have made loans to clients.
Private bankers do not qualify for referral bonuses until they reach
monthly sales quotas, but Carroll said his bankers and brokers are
driven by "internal recognition for playing team ball" rather than
by financial incentives.
Wells's private bank targets clients with $1 million to $50 million
of household assets compared with brokers, who aim for households
with $250,000 to $5 million.
Carroll's wealth sector is Well's smallest unit but generated 23
percent of the bank's $10.3 billion of fees and 52 percent of its
net interest income last quarter.
In 2015, the wealth businesses will spend about $250 million on
product upgrades and training, areas that Carroll said have been
neglected. The division aims for average profit margin over the next
five years in the mid-20-percent level, down from the high 20s
before the 2008 financial crisis, he said.
(Reporting By Jed Horowitz; Editing by Steve Orlofsky)
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