Wells Fargo leaders are sketching plans to combine the banks’ brokerage and private wealth management units, a spokesperson confirms.
Barry Sommers, who took over as CEO of wealth and investment management at Wells Fargo in June, began describing his “vision” for folding the units together in September. The reorganization, which would include The Private Bank and Abbot Downing, would result in “one client-facing structure,” the spokesperson tells FAIQ in an email.
"By creating one overarching management structure, we will simplify processes, improve how we operate, and deliver even better and faster service for our clients," the spokesperson says.
Some of the changes may occur prior to January, but the "bulk of the client teams will transition into one structure in 2021," the spokesperson adds. No further details about the reorganization are available at this time.
Last week, Wells Fargo CEO Charles Scharf told analysts that in the longer term, the bank wants to simplify products, reduce its real estate, move clients and employees to digital solutions, and shed existing business lines that “[don’t] either fit with what we do or have the right return characteristics.”
“An important takeaway is that our client teams continue to operate as usual, focused on serving the financial needs of our clients,” the spokesperson says.
This summer, Wells Fargo made plans to slash tens of thousands of jobs, and earlier this month, news emerged that the bank had already eliminated more than 700 commercial banking positions, with plans to make cuts across most of its business lines.
Wells Fargo has also fired “a sizeable group” of salaried advisors, and more FAs are expected to be terminated, as reported. The bank’s strategy is “to focus on a highly productive team of advisors and to manage out underperformers,” a spokesperson said last week.
Generally, financial advisors who are generating revenues for their employers are not targeted for layoffs when wirehouses undergo reorganizations, recruiters say.
But a recruiter tells FA-IQ that Sommers intends to lay off top wealth and investment management managers to create the single structure, and most of the layoffs will be among private wealth managers.
The recruiter, who has close contacts with advisors and managers at the bank but asked not to be identified, says some of the layoffs are likely to occur by October 31.
The restructuring reflects what many advisors expected would happen when Scharf took over as CEO in October last year, the recruiter says. "He has been there long enough to make these types of changes," the recruiter says.
The wealth management business represents a “sizeable franchise” for Wells Fargo” and is a “space that we love,” Scharf told stock analysts last week during a conference call after the bank released its third quarter earnings report.
But Scharf added: Wells Fargo is “just getting started” in “making progress at having its private bank and brokerage business work together.”
Meanwhile, Reuters reports that Wells Fargo is exploring the sale of its asset management unit, which is part of the company’s wealth and investment management business.
The bank has already discussed the sale with several asset management and private equity companies, sources who asked to remain anonymous tell Reuters. They add that the deal is not certain, according to the newswire. If it goes through, however, the sale could bring in more than $3 billion, two of the sources tell Reuters. A spokesman for the bank declined comment to the newswire.
The asset management business, which offers mutual funds and retirement products, managed $578 billion as of the end of June, Reuters writes.
The sale of the asset management business, meanwhile, would support earlier indications that Wells Fargo is trimming down. Scharf said in July that its expenses were “at least $10 billion higher than they should be.” And last week, on a call with analysts, Scharf hinted that the company is looking at various ways to cut costs, including dropping certain business lines.
Other cost-cutting measures the company is considering include reducing its corporate real estate, simplifying its product line and slashing expenses across various units — as well as significantly cutting its workforce, including in its wealth management unit.
— With reports from Alex Padalka
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