Is Wells Fargo Turning Crisis into Opportunity with New RIA Channel Plan?
David Kowach, president of Wells Fargo Advisors, channeled former U.S. President Barack Obama advisor Rahm Emanuel last month when he announced the firm will open several RIA offices in cities across the country in 2019.
"You never want a serious crisis to go to waste," Emanuel, then Obama’s chief of staff, told a Wall Street Journal conference of top corporate CEOs in 2008.
Emanuel, now the mayor of Chicago, elaborated on what he meant, according to a Wall Street Journal account. "Things that we had postponed for too long, that were long-term, are now immediate and must be dealt with. This crisis provides the opportunity for us to do things that you could not do before," Emanuel said.
With its RIA plans – about which Wells Fargo is scheduled to release more details on January 29 – has the bank seized “the opportunity” presented by its multiple public relations crises?
Notably, Wells Fargo’s broker-dealer rivals – including Morgan Stanley and Merrill Lynch, which have not suffered such severe public relations controversies in recent years – express no interest in pursuing RIA channels.
At a press conference this month, following parent company Bank of America’s release of fourth quarter earnings, Andy Sieg, the president of Merrill Lynch Wealth Management, said his firm “had no intention of heading in the direction of an RIA.”
Bank of America’s commercial bank capabilities for clients “could not be delivered effectively through an RIA,” Sieg said.
Similarly, following Morgan Stanley’s fourth quarter earnings release, CEO James Gorman told analysts his firm would pursue acquisitions in 2019, and it is understood the acquisitions aren’t expected to include RIAs.
“It seems like Wells Fargo is allowing their own advisers who are currently in the employee channel to open up their own RIA firm,” Danny Sarch, the president of Leitner Search Consultants in White Plains, N.Y., writes in an email. “This is just an extension of allowing their advisers to go independent” with Wells Fargo’s independent broker-dealer channel.
Merrill Lynch and Morgan Stanley have no ready-made independent channels. “So it’s no surprise that they would not want to duplicate what Wells Fargo has done,” Sarch writes.
And there’s also the lack of severe crises for those rivals.
“Wells Fargo has a franchise risk with all of their scandals. This is an easy way to try to keep advisers within Wells Fargo who otherwise would want to move,” Sarch writes.