Wells Fargo CEO Charlie Scharf is on a mission to cut costs, and tens of thousands of customers are about to feel the pinch.
Last year, in an effort to streamline its sprawling wealth-management business, Wells Fargo placed its private-banking operation and its brokerage unit under the same umbrella; retired the upscale Abbot Downing brand, which catered to clients with at least $50 million in assets; and absorbed Abbot Downing into the private bank.
Now, in a move that stands to affect tens of thousands of customers, Wells Fargo is seeking to purge the private bank of client accounts that carry balances of under $5 million, according to internal documents obtained by Insider. The transition, which kicked off in August, could result in added fees for some customers as they get moved into lower-tier offerings, the documents show.
In an effort to keep customers happy, Wells Fargo has given its advisors a carefully crafted script for explaining the moves — and has promised to waive fees until 2024. The firm started notifying clients of the shift on August 12, and the transition is expected to be completed by the end of November, according to the materials.
"Keep the positives top of mind," Wells Fargo told brokers in a recent memo explaining the changes. "The Wealth Management team will continue to serve the client, all monthly fees will be waived until 12/31/2023."
"Periodically we review our client's accounts to ensure they have the products and services that are appropriate for them," advisors have been told to say when asked about the switch. "In our recent review, we saw that there was another deposit account, mentioned in the letter, which was a better match with the financial activity that you are currently conducting with Wells Fargo."
It's the latest move in a reorganization that has led to dozen of Wells Fargo's private bankers jumping ship over the last two years, hobbling the division's ranks even as it has boosted earnings. Advisor headcount was down 5 percent over last year for the quarter that ended in June, according to the company. Second-quarter earnings, meanwhile, increased for the wealth and investment management unit, clocking in at $603 million, up almost 30% year-over-year.
Fee-bearing accounts are part of the new 'premier banking' product the bank launched this summer
Previously, the private bank served clients with between $2.5 million to $50 million in assets, while richer clients were managed by Abbot Downing, according to a former Wells Fargo private banker who didn't have authority to speak publicly about the bank's internal operations and asked to remain anonymous.
Now, private bank clients with account balances of less than $5 million will have their checking balances moved from the private bank's checking product to a new mass-affluent product called "premier banking," according to the documents which Insider reviewed. Wells Fargo rolled out its new premier banking service in July for people with at least $250,000 in "linked balances," including checking and investments. Customers with linked accounts under $250,000 will have their balances moved to retail banking offerings such as "everyday checking."
Customers placed in the premier checking accounts have to maintain a minimum balance of $250,000 to avoid a monthly service fee of $35, according to the documents. Clients placed in prime and everyday checking accounts will be charged a monthly service fee of $25 if their balances drop below the minimum thresholds of $20,000 and $500 respectively.
Wells Fargo customers are also being told they may "pay fees for certain transactions, such as incoming and outgoing wire transfers, and non-ATM withdrawal fees depending on the type of account," the documents show.
In a statement, a spokesperson for the bank told Insider that these clients' advisors will still be able to access services such as estate planning and lending, thanks to its new focus on specialists who serve a wider swath of clientele.
"Our model allows us to offer The Private Bank experience to far more clients than ever before," the spokesperson said. "All of our advisors can now deliver more to their clients by partnering with specialists in banking, trust services, investment solutions, and planning."
The transition will move some 45,000 accounts from the private bank to the premier bank, according to the ex-employee, who spoke on the condition of anonymity. Their investments will be managed by advisors within the wealth and investment management division, which also houses the private bank.
In addition to the potential for monthly service fees, customers moved out of the private bank's Private Bank Interest Checking product also stand to lose out on more favorable interest rates, as advertised by Wells Fargo.
"Interest rates didn't matter 12 months ago because there was no interest to be paid, but now there is," the Wells Fargo banker said. "You're going to go from making maybe 60 basis points on your overnight cash to one basis point. A lot of clients, in the next 30 days when these conversions occur, are going to realize they are being harmed in having their interest values down."
Dozens of elite Abbot Downing bankers are flocking to the exits
The banker told Insider that folding the ultra-high-net-worth Abbot Downing brand aggravated some bankers.
At least 36 employees from the retired Abbot Downing unit have left Wells Fargo since the beginning of the year, according to an analysis by Insider of job moves ex-employees posted to their LinkedIn accounts. More than half of the ex-bankers Insider identified have since joined Callan Family Office, a new registered investment advisor founded by former Abbot Downing head Jack Ginter, who left Wells Fargo in July 2021 after less than two years at the firm.
According to advisors' bios posted to Callan's website, other senior executives who have gone on to join Ginter at the firm include Amy Jucoski, a former senior director of legacy and wealth planning at Abbot Downing; and Britt Whitfield, who was previously an Abbot Downing regional chief investment officer.
In addition to Abbot Downing, the broader private bank at Wells Fargo has also seen a wave of high-profile departures. This year, the division has lost at least three teams — each overseeing more than $1 billion in assets — to competitors, including JPMorgan, First Republic, and Truist Wealth. Morgan Stanley also lured a North Carolina team managing as much as $2 billion, according to AdvisorHub.
One of the main pain points, according to the departed Wells Fargo banker, is that the reorganization has spread resources thin.
"We used to have wealth planning, trust investment strategy. They all used to be stacked against the private bank, and all of a sudden, they got stacked against everything, diluting the resources to legacy teams," this person said. "The legacy salaried wealth advisors that were in Abbot Downing and the private bank say, 'Why am I here?'"
Do you work for Wells Fargo's Wealth and Investment Management unit? Are you a current or former client of Wells Fargo Private Bank or Abbot Downing? Reach out to Hayley Cuccinello at hcuccinello@insider.com or 917 740 5340.
