Battles between brokers and private bankers for very wealthy clients have always been fierce, but Wells Fargo & Co is changing its rules to encourage partnerships of the two rivals that it says will open a $300 billion opportunity.
Wells Fargo, the fourth-biggest U.S. bank company, has told brokers who sell investment plans and bankers who sell loans and mortgages to refer clients with household assets of $2.5 million to each other, down from $5 million when the partnership plan began two years ago.
The change was rolled out nationally in the past few weeks because of the program's success at the higher threshold, David Carroll, head of Wells's Wealth, Brokerage & Retirement division said at a bank analyst conference in Boston on Thursday. Wells has booked $1.7 billion of loans, $2.2 billion of new brokerage assets and $1.4 billion of trust assets since the partnership plan began.
"It is not an industry norm for traditional private bankers to play nice with brokers, but we are making it work very well," Carroll said.
By halving the wealth threshold, Wells nearly quadruples client households eligible for referrals to 50,000 from 13,000 and doubles to $300 billion potential brokerage assets now kept outside the bank.
The number of brokers with upscale clients eligible for referrals will jump to 8,200 from 5,800, and the number of advisers in the program will likely rise to 900 from 500, according to slides accompanying Carroll's presentation. On the flip side, only 11 percent of wealthy clients with Wells mortgages use the bank's brokers and retirement advisers.
Brokers' resistance to selling jumbo mortgages and other bank products has been narrowing. Many initially resisted handing clients to bankers whose services might be less than premier, but interest income and fees from selling bank products are so high that Wells, Bank of America Corp, Morgan Stanley and UBS AG have rolled out lucrative bonus plans to encourage sales and referrals at brokerage units.
More than 60 percent of Wells brokers have made loans to clients. Private bankers do not qualify for referral bonuses until they reach monthly sales quotas, but Carroll said his bankers and brokers are driven by "internal recognition for playing team ball" rather than by financial incentives.
Wells's private bank targets clients with $1 million to $50 million of household assets compared with brokers, who aim for households with $250,000 to $5 million.
Carroll's wealth sector is Well's smallest unit but generated 23 percent of the bank's $10.3 billion of fees and 52 percent of its net interest income last quarter.