Three years and nearly $1 billion later, Wells Fargo & Co. is finally playing offense in one of Wall Street’s hottest battlegrounds: wealth management.

The banking giant is trying to lure hundreds of independent advisers to join its platform as part of a larger push to expand the firm’s business catering to rich clients, according to Barry Sommers, who oversees Wells Fargo’s wealth and investment management unit. The independent offering is already Wells Fargo’s fastest-growing wealth channel.

“We believe over the next three to five years there’s a significant opportunity to gain a lot of market share,” Sommers said in an interview from Wells Fargo’s offices in New York’s Hudson Yards neighborhood.

The moves are a far cry from just a few years ago, when Wells Fargo’s wealth division was hit particularly hard by a series of scandals that have long plagued the bank. Advisers were fleeing by the thousands and, what’s worse, they were taking their lucrative clients with them.

When Chief Executive Officer Charlie Scharf took the reins at Wells Fargo in 2019, he quickly tagged the firm’s wealth offerings as an area he’d seek to develop. For the turnaround, Scharf turned to Sommers.

The division’s assets under management don’t sit on the firm’s balance sheet, so Wells Fargo can expand in wealth management without running up against a Federal Reserve-imposed asset cap that’s prohibited the firm from growing beyond its size at the end of 2017.

Upgrading Systems

It’s not the first time Sommers and Scharf have set out to improve a bank’s wealth operations: The pair previously worked together at JPMorgan Chase & Co., where they developed a private client offering to serve wealthy branch customers.

After Sommers joined Wells Fargo in 2020, he asked Scharf for $1 billion to invest over multiple years in the beleaguered division, according to person familiar with the matter, who asked not to be named discussing internal deliberations. He then spent the intervening years remaking the unit’s management team, simplifying its structure and upgrading the technology.

“Fixing the place” was step one when he arrived, Sommers said, declining to comment on the precise amount the company invested in the business. The 54-year-old was responsible for everything “from digital account opening to getting rid of fax machines, I mean you name it.”

Banks large and small have swarmed the wealth-management space in recent years, citing the explosion in global wealth and opportunity for steady fee income. Forging closer ties to rich customers also offers connectivity with other businesses, such as investment banking.

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One of Sommers’s first moves was to slim down the number of ways Wells Fargo distributes its different wealth offerings. These days, the firm has just three of these so-called channels: advisers that sit in bank branches across the country, the firm’s traditional wirehouse and FiNet, the fast-growing network of independent advisers.

Already, that makes Wells Fargo unique. The firm is one of just four banks that house a major wirehouse offering. The others - Bank of America Corp.’s Merrill Lynch, Morgan Stanley and UBS Group AG - don’t have an independent option for advisers to go to whenever they’re looking to leave.

In recent weeks, Wells Fargo lured teams from Morgan Stanley and Raymond James Financial Inc. to the independent platform. The wirehouse offering has also been adding a bevy of talent recently, including two advisers in Fort Worth from JPMorgan Chase & Co.

Wells Fargo has had the FiNet offering for more than 20 years; already, it’s home to more than 1,600 advisers. That compares with the 12,000 employed across the traditional wirehouse and branch offering at year-end.

The advisers in FiNet are contractors rather than Wells Fargo employees. That means they get higher annual payouts but also shoulder more of the costs associated with their business; for instance, independent advisers are responsible for securing office space and equipment, training and paying underlings and doing their own marketing.

Still, the setup is less profitable for Wells Fargo. But the lender views it as an opportunity to boost revenue while keeping more of its advisers on its platform.

“We really do believe that five years from now the independent channel will be our biggest channel,” Sommers said. “We’re not sitting there worrying about margins, we’re worrying about building the right platform for advisers and clients.”