Wells Fargo Advisors plans to add fractional share capabilities to its wealth management platform next year, according to a wirehouse executive.
Enabling trading in fractions of stocks is expected to boost separately managed accounts because they will likely become more attractive to a wider pool of investors, Joe Nadreau, the wirehouse’s managing director and head of brokerage and platform services, said last month. It will also allow clients to more easily commit to regularly scheduled purchases of fractional shares because they will involve smaller amounts, he said.
With fractional shares, investors who “only have $100 a week” can invest in a portfolio, Nadreau said during a webcast organized by Money Management Institute.
Nadreau did not provide a specific timetable for the unveiling of Wells Fargo Advisors’ fractional share capabilities, and a spokesperson for the wirehouse declined to comment.
Plans by Wells Fargo Advisors to add fractional share capabilities come in the wake of recent moves by Morgan Stanley, Charles Schwab and others to increase their own fractional capabilities for their wealth management and self-directed trading platforms recently. In August, Ben Huneke, Morgan Stanley's head of investment solutions group, told FA-IQ sister publication FundFire that increasing fractional share capabilities was a “top priority” for 2021.
A Morgan Stanley spokesperson tells FA-IQ there are no updates on the firm’s fractional share capabilities. A spokesperson for UBS declined to comment. Merrill Lynch spokespersons did not respond to a request for comment on this story.
Charles Schwab offers fractional shares trading, but only on its direct retail platforms.
“We don’t offer it really as an advisor capability, largely because we haven’t heard the demand for it,” Andrew Salesky, senior vice president of digital advisor solutions, said earlier this month at the Schwab Impact 2020 conference. He said the firm is monitoring potential demand form advisors.
William Jeter, an advisor at Abacus Planning Group in Columbia, S.C., says the pairing of fractional share capabilities with advisor recommendations can be sensible for firms like Wells Fargo or Morgan Stanley and is good news for smaller clients. Abacus has nearly $1.3 billion in client assets custodied with Schwab.
However, Jeter downplays the significance of fractional shares for advisors.
“If an advisor has a subset of 25 stocks they like for smaller clients, maybe fractional shares allow the advisor to get closer to their target weights,” he says: “It is probably fairly rare where a couple hundred dollars allocation difference makes a huge impact long term.”
Do you have a news tip you’d like to share with FA-IQ? Email us at email@example.com.