Wells Fargo Suffers Despite Great Results From Its Advisory Unit

Wednesday, April 20, 2011 22:19
edit
Wells Fargo Suffers Despite Great Results From Its Advisory Unit

Tags: Wells Fargo

Another "good news, bad news" quarter, this time at Wells Fargo. The brokerage did well. The bank didn't.

This Website Is For Financial Professionals Only


 

Wells Fargo's wealth management unit -- which includes the old Wachovia brokerage operation as well as retirement services -- squeezed 72% more profit out of slightly higher revenue in the first quarter.

 

Just about all the needles pointed the right direction. AUM edged up 5% to a cool $1.2 trillion and revenue on those accounts climbed faster at an annualized rate of 8%. 

 

That indicates that Wells Fargo's advisors are getting smarter about generating higher ROA on every dollar they manage. 

 

For example, the amount of money in fee-bearing managed accounts surged 21% over the course of the year and now accounts for 21% of overall AUM, compared to 18% of all client assets in early 2010.

 

So the push to convert commission-based clients into fee-based clients seems to be working here.

 

And since the bank added only 0.3% to its non-bank advisory force -- and shed 10% of its bank advisors -- the advisors left at Wells Fargo are on average stronger producers with bigger books than they were a year ago.

 

All in all, the typical Wells Fargo advisor generated $669,000 on $62.5 million, for an average ROA of 1.07%. 

 

But despite all that progress, lack of growth for the bank proper -- which still accounts for 85% of the business -- spooked investors. 

 

The lending environment is still stagnant, and Wells Fargo climbed to the head of the industry as a lender first and foremost. 

 

Coming so soon after Bank of America's disappointing results despite Merrill Lynch's record quarter, this might be a trend of booming brokerage firms trapped in sagging banks.

 

Comments (0)

Write comment

You must be logged in to post a comment. Please register if you do not have an account yet.

busy