Wells Fargo Sheds 390 FAs in Q3, Wealth and Investment Mgmt Net Income Down 64% YoY

By Alex Padalka October 14, 2020

Wells Fargo says its wealth and investment management business shed hundreds of advisors as net income fell sharply year-over-year, despite total client assets remaining unchanged.

The bank had $1.9 trillion in total client assets at the end of the third quarter in the unit, which includes Wells Fargo Advisors, the Private BankAbbot Downing and Wells Fargo Asset Management, according to the firm’s latest quarterly earnings report. That was up from $1.8 trillion the company posted in the prior quarter. But assets remained flat compared to the third quarter last year, which Wells Fargo says is due to higher market valuations offset by net outflows in its correspondent clearing business. 

Client assets in the retail brokerage totaled $1.6 trillion at the end of the third quarter of 2020, also flat compared to the third quarter last year, but advisory assets rose 6%, to $602 billion. Wealth management client assets stood at $229 billion at the end of September, also flat year-over-year. 

Average loan balances in the third quarter were 5% year-over-year while average deposit balances were 23% higher.

But the company continued losing financial advisors during the third quarter, ending with 12,908, down from 13,298 it had at the of June and from 13,723 it had at the end of the third quarter of 2019.

Net revenue in the wealth and investment management unit rose 4% during the third quarter, to $3.79 billion, but that was still $1.35 billion lower than what it brought in during the third quarter of 2019. The company attributes the lower third-quarter revenue year-over-year to was a $1.1 billion gain from the sale of its Institutional Retirement and Trust business in third quarter 2019, as well as lower net interest income.

Noninterest expenses in the latest quarter were $3.18 billion, which was 1% higher than in the second quarter, according to the report. Wells Fargo attributes the increase to higher broker commissions as well as equipment expenses but adds that they were partially offset by lower employee benefits expenses driven by a $147 million drop in deferred compensation and other personnel expenses.

And while income in the segment soared from $180 million in the second quarter of 2020 to $463 million in the latest quarter, that was still 64% lower than the $1.28 billion the unit posted in the third quarter last year.

Wells Fargo CEO Charles Scharf reiterated the bank's main priorities and the impact of the Covid-19 pandemic in a statement accompanying the earnings release.

“Our top priority continues to be the implementation of our risk, control, and regulatory work, but we are also taking targeted actions to improve the experience for our customers, clients, communities and employees. We expect that these actions will also improve our operational and financial performance,” Scharf says in the statement.

“As we look forward, the trajectory of the economic recovery remains unclear as the negative impact of Covid continues and further fiscal stimulus is uncertain, but we remain strong with our capital and liquidity levels well above regulatory minimums,” he adds.

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