As a consequence of being acquired, brokers from Wachovia, Smith Barney and Merrill Lynch have been introduced to new payroll systems, and not all of them are feeling good about the changes, especially those at Wachovia, who have been told by Wells Fargo executives that they’re going to be hit with a flat 25 percent tax withholding at minimum, no matter which tax bracket they’re in.
Brokers from Smith Barney and Merrill Lynch don’t have the same requirements because of their draw and commissions, making them a little more amiable to changes, while those from Wachovia aren’t as happy with what Wells Fargo has decided on their behalf.
How the new system at Wells Fargo will work, is brokers or financial advisers will receive their “draw” every othe week, while checks from commissions will be paid on a monthly basis. Usually this is implemented in a draw versus commission practice, where brokers are paid out a minimum of $445 required by law to avoid overtime pay, which is usually taken of their commissions, assuming they’re higher than that. Some in the industry pay draw plus commission, but the usual practice is to pay out of the commission rather than addition to it.
Why this is important is the brokers, for the most part, will be taking home less pay than normal, specifically those who make less than $500,000 a year. That of course means the 25 percent forced withholding is more than they actually would have had to pay.
Taking into consideration the average broker or adviser working for Wells Fargo generates about $400,000, that could be make a big impact on them, as they won’t be able to get their tax withholding money back until 2011.
In a move that I consider a slap in the face, Wells Fargo is offering those brokers who are affected a loan for a year for 3 percent interest. That will supposedly help them with their cash-flow problems until they receive their money from the government. No wonder they’re grumbling, although this was communicated to the brokers and advisers during the decision-making process. Even so, that doesn’t help them any over the next year or so.
Spokeswoman for Wells Fargo Advisors, Teresa Dougherty, confirmed this wasn’t a surprise to their brokers, as the company communicated openly to them during the process. The changes were necessary she said because of the way the two legacy systems operated differently.
While some top-performing brokers at the company say this is a nightmare, evidently Wells Fargo felt to attempt to solve the differences too quickly would have been an even bigger one.
Still, it does make you wonder why Bank of America and Morgan Stanley didn’t have to go this route with their financial advisers and brokers while Wells Fargo did. I’m sure the Wachovia people are asking the same question.
