LAS VEGAS—Wells Fargo is planning to launch an RIA in 2019.
Wells Fargo Advisors president David Kowach told Citywire in an interview at the MarketCounsel Summit that the wirehouse is try out the business model in around four or five different test markets next year after mulling the idea for more than two years.
‘Today, we’re big in private client, we’re big in bank brokerage, we’re big in independence, we launched Intuitive Investor, which is our robo[advisor]… and I just start to look out in the marketplace and say we’re going to have to test [an RIA] too,’ Kowach said. ‘We’ll do a test in 2019 at some point. I don’t think it will be a big test at first.’
Kowach (pictured above) first mentioned the idea in a keynote speech before hundreds of RIA industry luminaries, many of whom had previously worked at wirehouses like Wells Fargo.
‘We think it’s a good opportunity for us,’ Kowach said. ‘I think a room like this [conference] reminds me that people want us to be available in different formats. I buy that.’
The decision to test out an RIA comes as Wells Fargo is trying to move on from a series of scandals across several business lines. The firm recently finished an internal investigation into allegations of gender bias in its wealth management division, the Wall Street Journal reported, which came on the heals of a wider scandal about creating false accounts.
Advisor headcount at the wirehouse is also trending downwards, as several teams of advisors have left the firm in 2018 to launch their own independent RIAs. Wells said in its most recent earnings report that it had 14,074 total financial advisors on staff at the end of the third quarter of 2018, down from 14,226 in the second quarter of 2018 and down from 14,564 at the end of the third quarter of 2017. The firm had 15,086 advisors on staff at the end of the third quarter of 2016.
Kowach said that though he estimated the firm’s advisor headcount is down 6% over the past five years, the firm’s client asset growth is up 20% in that span.
‘I feel like we’ve got great advisors today and we’re totally focused in the home office on innovating around service and advice to clients,’ Kowach said.
Kowach became president of Wells Fargo Advisors in 2016. Under his leadership, the firm merged its bank brokerage advisors into the firm’s wirehouse channel in August.
With regulation a hot topic across the industry, Kowach also held out an olive branch to RIAs skeptical of the incentives behind the commission-based brokerage model, endorsing a uniform standard of conduct for RIAs and brokers and telling the conference audience that the term ‘fiduciary’ was ‘not the enemy.’
‘I think that the question becomes: “Am I acting in my clients’ best interest?,”’ Kowach said. ‘To me, I think we should know our clients, we should have plans for our clients, we should be able to evidence the allocation strategies that we have based on what we know about their goals and risk tolerances.’