Inside Wells Fargo’s Bet on Independent Advisors

Wells Fargo’s gamble on indie advisors may be paying off. 

The San Francisco-based brokerage has been quietly building out an independent channel that has helped stem an exodus of advisors at the firm in recent years. Launched in 2001, the indie broker-dealer channel called Financial Network — along with a new registered investment advisor program in development — has quickly become the fastest growing segment of its wealth management unit. It’s an effort to compete with the exploding independent movement and hold on to employees that are looking for more freedom with their practices. 

“The fastest-growing piece of the wealth management business, when you look at the growth in the number of advisors, is that independent channel,” Wells CFO Mike Santomassimo said at an industry event last week. “It allows us to keep the folks that were moving out of our different channels … [and] we’re starting to recruit people from other places,” he said.

Please, Don’t Go

FiNet is a one-of-a-kind program among wirehouse competitors like Merrill Lynch, Morgan Stanley, and UBS, and may finally be getting the love it deserves. The channel lets independent broker-dealers run their own businesses, while having access to lending, research, and alternative investments through Wells. “That flexibility has helped drive much of their recruiting success,” said New York–based recruiter Mark Elzweig. “Advisors like being in control of their own destiny.” 

The company is also building out a fledgling RIA Solutions channel for registered investment advisors and is reportedly hiring a top executive to run the project. In fact, advisors can now elect to be part of the traditional employee channel, called Private Client Group, the FiNet brokerage channel, an upcoming RIA Solutions channel, or a bank advisor channel. “Firms that encourage advisors to choose their own business model  have a big leg up,” Elzweig told The Daily Upside.

Wells stopped reporting the number of its advisors in earnings reports in 2023 (as did competitors), but had 12,027 advisors at the end of 2022. Santomassimo reportedly said the firm had roughly 12,000 advisors earlier this year. A Wells Fargo representative did not disclose head count, but said the firm can help advisors from other wirehouses launch independent practices or join existing ones.

Pick Your Own Adventure. So, what’s the rub? Independent advisors are just not as profitable as employee advisors. Since they bear more of the overhead for their independent businesses, they typically earn upwards of 90% payout on revenues. That number is closer to 40% on the employee side. The reason other wirehouses haven’t made the indie option available is simple economics. “They’re afraid of cannibalizing business,” Elzweig said. 

FiNet will keep many inquisitive Wells Fargo advisors with the home team and will attract others from outside the firm, according to Elzweig. In fact, some advisors sign on with Wells Fargo’s traditional channel with the intention of “porting themselves over” to the independent channel once their recruiting deal winds down, he said. Call it a mini-breakaway.

Hey, if you can’t beat ’em, open up an RIA.