Thursday, November 5, 2020

Small Account Policies Hurt Advisers, Force Transitions

Small account policies at brokerage firms are understandable from a business perspective, but are a significant problem for the customer and the firm's advisors.

Brokerage firms do not want to spend the time or resources in dealing with small account (typically accounts with under $250,000 in equity). At the same time, they do not want to give up those accounts and the revenue they generate.

To remedy this dilemma, firms created "call centers" and forced brokers to transfer their small accounts to those call centers, where investors' accounts are handled by a random selection of advisers. The investor loses his adviser, and the adviser loses his customer. Not a good solution for the investor, but one that brokerage firms have been using with increasing frequency.

These policies at Wells Fargo, Merrill Lynch, RBC Wealth Management and other full-service firms have been imposing are particularly irksome to advisors in small markets that are not traditional pockets of wealth.

For example, according to AdvisorHub a Wells Fargo broker in Indiana cited small-account policies when he moved his family team to Stifel in June, as did a Colorado independent broker who joined LPL Financial in May after affiliating with Wells for 38 years.

Wells Fargo Advisors’ 2020 compensation plan penalizes private client group brokers with payouts of 20% on household accounts with less than $250,000—up from the previous floor of $100,000. Brokers at Wells typically keep 50% of clients’ fees and commissions after meeting monthly revenue hurdles.


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