Wells Fargo Wealth Management Business Posts Stagnant First Quarter

Wells Fargo’s wealth management business reported no growth in assets and a slight decline in advisors for the first quarter versus the same time period a year ago. Total client assets in the bank’s wealth, brokerage and retirement division sat at $1.4 trillion, flat versus the first quarter of last year, despite a 6 percent rise in the S&P 500 over that period. The number of financial advisors at the firm declined about 100 to 15,134.

“They’re kind of going sideways on the wealth management side,” said Alois Pirker, Aite Group analyst. “During the four quarters of 2011 plus this one, nothing has happened at Wells Fargo; it’s all flat. We haven’t seen any real growth. Profitability is a big issue in the wealth management space; assets levels are the key drivers, and if that’s flat there’s no driver there. There’s not much room to cut costs.”

That said, the overall Wells Fargo bank is well capitalized and reported its fourth consecutive increase in earnings. First quarter net income for Wells Fargo as a whole came to $4.2 billion, up 12 percent versus the year ago quarter, on revenue of $21.6 billion. The wealth brokerage and retirement division accounted for about 7 percent of total earnings for the bank.

“If you’re Wells Fargo, you are less concerned about [weakness in the wealth management division], because you have deep pockets, and the overall firm is well positioned,” said Pirker. “They came through the crisis not only intact but much stronger.”

Wells’ wealth, brokerage and retirement group is making some gains in fee accounts and selling banking products, however. Managed account assets were up 11 percent versus 2011 to $279 billion, while “cross-sell” for the group rose to 10.16 products per household from 9.85 in the year-ago quarter.

“They’re probably taking advantage of the cross-selling synergy thing more subtly than Merrill, so their advisors may be a little bit more amenable to it,” says Cerulli Associates Scott Smith. “Plus the bank has long been integral to the firm, since Wachovia took over Prudential.”

Wells Fargo’s wealth, brokerage and retirement division reported earnings of $296 million in the first quarter of 2012 on revenue of $3.1 billion. Earnings were down 14 percent versus the year-ago quarter, while revenues declined 3 percent versus the first quarter of 2011.

Chief Financial Officer Tim Sloan said on a conference call that excluding a fourth quarter gain on the sale of HD Vest, first quarter earnings would have increased versus the fourth quarter, driven by higher asset-based fees, brokerage transaction revenues and securities gains.

Wells Fargo officially completed its integration with Wachovia in the first quarter, both on time and under budget. But it still has some work to do in terms of advisor culture, said Smith. “They completed it from at technical perspective in the first quarter, but from a cultural point of view, they still have a lot of advisors who still think of themselves as A.G. Edwards or Wachovia advisors.”