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Wells CFO: Wealth Management Success Not Tied to Product Manufacturing

By Miriam Rozen February 25, 2021

Wells Fargo’s asset management unit is “not critical” to the potential success of its wealth management business, according to the bank’s chief financial officer, Mike Santomassimo.

The bank announced earlier this week that it would unload its asset management unit to a pair of private equity companies as part of a plan to focus on growing its wealth management business.

The wealth management unit, which offers mutual funds and retirement products, will be sold to GTCR and Reverence Capital Partners for $2.1 billion. The deal is expected to close in the second half of 2021, with Wells Fargo keeping a 9.9% equity stake and continuing to serve both as a client and a distribution partner, according to the bank.

The deal is expected to have a “small, immaterial impact to [Wells Fargo’s] bottom line,” Santomassimo said yesterday during an online presentation at the Credit Suisse Financial Services Forum.

When the deal closes, the bank is expected to book between $500 million and $600 million in pre-tax gains, according to the CFO.

The asset management unit is “not critical to being successful in the wealth management business … which is really where we have the scale and differentiation,” he said.

If the private equity acquirers provide asset management capabilities to Wells Fargo as planned, “[t]his is a much better answer for us,” he added.

Wells Fargo will be “a big client” with “a small passive stake” in the asset management business after the deal closes, Santomassimo said.

The private equity acquirers are “going to be good operators of that business,” he said.

“We felt they [would be] better owners of it than us,” he added. “In the wealth management business, it wasn’t necessary for us to own the manufacturing piece of it to do a really good job and be successful.”

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