Wells to Double Brokerage Account Minimums to Qualify for Fee Waiver
In another sign of large firms’ eagerness to shift clients to fee-based advisory accounts and brokers to servicing wealthier investors, Wells Fargo Advisors is doubling the asset minimums clients must keep in brokerage accounts to avoid being charged a $300 annual fee.
“The fee amounts per account will remain the same, however, the threshold amount for clients who receive an automatic waiver has shifted,” Wells spokeswoman Desari Mueller said in a statement. “This will impact a small number of clients.”
John Alexander the head of Wells’ employee brokerage channel, briefed managers on the changes at an annual field leadership meeting in St. Louis last week, sources said. The planned change, more than three years after Wells Fargo Advisors continues to lose brokers and clients in the wake of its sister bank’s fake-account scandals, was reported earlier by “InvestmentNews.”
Wells’ brokerage account asset floor remains lower than its large competitors, Alexander told managers, according to a source who was at the St. Louis meeting. (The firm also waives the fees for households with $250,000 in advisory accounts or who add at least $100,000 to their accounts annually, and sources said the fees and the exceptions have led to “significant” increases in account assets.)
UBS in 2017 raised the minimum account size it requires for waiver of its annual $500 brokerage account fee to $2 million from $1 million.
The Wells change does not affect advisory accounts, where clients fees are based on a percentage of account assets. Wells and other firms have long favored such accounts because they generate revenue regardless of client’s proclivity to trade and because they discourage brokers from encouraging trades to increase their commissions.
The higher minimum at Wells also underscores large firms’ inducements to brokers to shift their attention to wealthier clients. Wells Fargo Advisors this year began paying brokers just 20% of revenue from household accounts with less than $250,000 in assets, an increase from $100,000 last year. Its standard payout is 50% once monthly revenue reaches about $20,000.
Merrill Lynch Wealth Management does not pay brokers on accounts under $250,000 and UBS and Morgan Stanley withhold payment on accounts under $100,000.