Wells will double the minimum number of brokerage accounts to qualify for the fee waiver

March 5, 2020

In another sign of big companies’ eagerness to shift clients to fee-based advisory accounts and brokers serving wealthier investors, Wells Fargo Advisors is doubling the minimum assets clients must maintain in brokerage accounts to avoid being charged an annual fee of $300.

Brokerage accounts that charge trade-based commitments must have at least $500,000 as of June 30 to avoid the maximum fee, up from $250,000 currently, a Wells Advisors spokeswoman said Thursday. The first statements reflecting the changes will be sent in September.

“Per-account fee amounts will remain the same, however, the threshold amount for customers who receive an automatic waiver has changed,” Wells spokeswoman Desari Mueller said in a statement. “It will impact a small number of customers.”

John Alexander, head of Wells’ employee brokerage channel, briefed officials on the changes at an annual field leadership meeting in St. Louis last week, sources said. The planned change, more than three years after Wells Fargo Advisors continued to lose brokers and clients following fake account scandals at its sister bank, was reported earlier by “InvestmentNews”.

Wells’ brokerage account asset floor remains lower than its larger competitors, Alexander told officials, according to a source at the St. Louis meeting. (The company is also waiving fees for households with $250,000 in advisory accounts or adding at least $100,000 to their accounts per year, and sources said the fees and exceptions have resulted in an increase” significant” account assets.)

In 2017, UBS raised the minimum account size required for its annual brokerage account fee waiver from $500 to $2 million from $1 million.

Wells’ change does not affect advisory accounts, where client fees are based on a percentage of account assets. Wells and other companies have long favored these accounts because they generate revenue regardless of the client’s propensity to trade and because they discourage brokers from encouraging trades to increase their commissions.

The higher minimum in Wells also underscores big business incentives for brokers to shift their focus to wealthier clients. Wells Fargo Advisors this year began paying brokers just 20% of income from household accounts with less than $250,000 in assets, up from $100,000 last year. Its standard payout is 50% once monthly earnings reach around $20,000.

Merrill Lynch Wealth Management does not compensate brokers on accounts under $250,000 and UBS and Morgan Stanley withhold payment on accounts under $100,000.