Wells Fargo’s Wealth Management Earnings, Headcount Dip but Cross Selling Improves

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Wells Fargo’s (NYSE: WFC) wealth, brokerage and retirement business posted slightly lower second-quarter earnings. Advisor headcount was also down compared to the first quarter, but, on a positive note, advisor cross-selling continued to improve. Total client assets in the division stabilized from the first quarter, totaling $1.4 trillion, and it was up by 11 percent from the same period a year ago.

During a conference call this morning discussing the firm’s second quarter earnings report, Chairman and CEO John Stumpf focused on the wealth management unit’s improvements since the bank’s merger with Wachovia in late 2008.

“In wealth, brokerage and retirement, the benefit of converting to one system and greater scale in each of its businesses are reflected in a 27 percent increase in client assets since the merger,” Stumpf said. “The retail brokerage business, which is the third-largest, full-service brokerage firm in the U.S., continued to grow with net flows of more than $50 billion into managed accounts since the merger; and, by focusing on meeting all the financial needs of our customers, wealth, brokerage and retirement’s deposits have grown 28 percent and broker loan origination have grown by 47 percent since the merger.”

Also on the call, Wells Fargo execs discussed its capital position, including the possibility of acquisitions. Stumpf said any acquisition would most likely happen in the wealth, brokerage and retirement business, something he has discussed previously. Last quarter, he did not address the issue.

“I’ve said this publicly that acquisitions that look most opportunistic or promising would be to help build out our wealth, brokerage and retirement area,” he said this morning. “We like that business a lot. We have opportunities to gain share there and have that share be more relative to the share we have in the business, compared to our deposit business.”

Overall, the bank saw its highest earnings in Wells Fargo history, with net income of $3.9 billion, a 29 percent gain from the second quarter of 2010. Earnings were $0.70 per share, up 27 over the same period, Stumpf said during the call.

WBR’s earnings were down by 2 percent from the first quarter to $333 million, which was driven by lower brokerage transaction revenue caused by lower market activity, said Tim Sloan, the firm’s new chief financial officer. But earnings improved by 23 percent from the year-ago period. Advisor headcount at the retail brokerage was down by 42 reps from the first quarter to 15,194, but up 1 percent from a year ago. In comparison, Bank of America, which also reported earnings today, said it added 500 advisors to its wealth and investment management business, bringing its total FA headcount to 16,200.

Importantly, Wells Fargo’s reps continued to cross-sell products from the banking side, selling 9.9 products compared to 9.82 in the first quarter. “Our continued focus in helping customers succeed financially drove cross-sell to 9.9 products up from 9.7 a year ago,” said Sloan, during the call.

Wealth management client assets were $204 billion, an 8 percent year-over-year boost. Managed account assets were up by 3 percent from the first quarter to $261 billion, driven by strong net flows, Sloan said. Asset-based fees were up by 3 percent from the first quarter, and expenses were down by 3 percent from the same period, due to lower personnel costs.