wealth, brokerage & retirement (wbr) · wealth, brokerage & retirement (wbr) david carroll,...

Wealth, Brokerage &

Retirement (WBR)

David Carroll, Senior EVP: Wealth, Brokerage & Retirement

Mary Mack, EVP, Wells Fargo Advisors

May 20, 2014

© 2014 Wells Fargo & Company. All rights reserved.

Wealth, Brokerage & Retirement (WBR) 1 Wells Fargo 2014 Investor Day

Agenda

Business Overview

- Description of WBR Businesses

- Performance update

Market and Client Trends

Our Structure, Approach and Competitive Differentiation

Key Growth Opportunities and Goals

- Strategic Opportunities for Growth

- Long Term Targets


Business Overview


Wealth, Brokerage & Retirement

To help our clients achieve financial peace of mind Mission

To be the premier provider of planning, advice, solutions and

services in every one of our markets Vision

Help our clients build, manage, preserve and transition their financial resources and wealth

Build enduring client relationships on a foundation of sound, thoughtful and objective advice

Develop individualized financial plans to help meet clients’ financial objectives

Core strategies

“We want to satisfy all our customers’ financial needs and help them succeed financially”


WBR offers a full range of financial advisory, lending, fiduciary and investment management services to clients using a planning approach

WBR business overview

Serves mass, mass affluent, affluent and high net worth clients’ advisory, brokerage and financial needs through multiple channels

Retail Brokerage

Provides affluent and high net worth clients with a complete range of wealth management solutions, including financial planning, private banking, credit, investment management and fiduciary services

Wealth Management

Provides comprehensive wealth management services to ultra high net worth families and individuals as well as endowments and foundations

Abbot Downing

Retirement

Provides institutional retirement (IRT) and trust services (including 401(k) and pension plan record keeping) for businesses, retail retirement solutions for individuals, and reinsurance services for the life insurance industry


WBR size & scope

Data as of 12/31/13 unless otherwise noted. Client counts not mutually exclusive. Assets include deposits. Households (HHs) defined as client accounts grouped based on address matching; Relationships represent clients grouped by relationship manager and may include multiple clients/accounts. (1) Source: Company data and peer analysis as of 12/31/13; based on FA counts. (2) Source: Cerulli Associates; based on 4Q13 Brokerage advisory assets (3) Source: Barron’s 2013 Survey; based on Assets Under Management in accounts > $5MM (as of Jun 30, 2013). Includes Brokerage Client Assets and Wealth Assets Under Management. (4) Source: Bloomberg Top 50 Family Offices; based on assets as of 12/31/12. (5) Source: 2012 Sun Life Distributor Roundtable Survey (based on sales), December 2012. (6) Source: Cerulli Associates; based on 4Q13 assets. (7) Source: PLANSPONSOR Magazine (based on 4Q12 defined contribution assets), June 2013.

Retail Brokerage

Wealth Management

Abbot Downing Retirement

Client Assets

$1.4T $179B $39B IRA: $341B

IRT: $298B

Clients 3.7MM HHs 70K Relationships Over 600

Relationships 3.3MM Retail

Retirement HHs

Industry Rankings

#3 U.S. Retail Brokerage firm (1)

#4 Wealth Management firm (3) #8 Family Office (4)

#2 Annuity Distributor (5)

#3 Managed account provider (2) #6 IRA provider (6)

#8 Institutional Retirement Plan Recordkeeper (7)

WBR operates four businesses that serve individuals and institutions across the spectrum of wealth


Channel diversity provides growth & choice Our multi-channel approach provides scalability, more stable growth and a consistent client experience

Assets with us

<$250K $250K-$1MM $1MM-$5MM $5MM-$50MM >$50MM

Multi-Channel Delivery Model

Abbot Downing

Phone Advisors

Client Service Model

Self Service

Direct

Personalized/local service Scalable solutions

Personalized/local service

Team of experts model Customized planning

and solutions

Cost-to-Serve

Low Modest/flexible High

Private Client Group (PCG)

FiNet Advisors, First Clearing, Mobile/Online

Wealth Brokerage Services

The Private Bank


WBR nationwide presence

(1) Retail Banking stores with Brokerage Offices represent advisors who deliver investment advice through bank stores and Wealth locations. Wells Fargo operates approximately 6,200 Retail Banking stores; WBR has a brokerage or wealth presence in over 95% of stores.

Comprehensive delivery channels with local advisors

WBR Locations

Private Client Group 784

Independent Channel Financial Advisors (FAs) 591

Total Traditional Retail Brokerage Offices 1,375

Retail Banking Stores with Brokerage Offices (1)

5,966

Wealth Offices 128

Abbot Downing Offices 17

Total Locations 7,486


WBR financial performance Strong track record of financial performance

$529

$1,005

$1,281 $1,328

$1,712

2009 2010 2011 2012 2013

Net Income $10,765

$11,730 $12,177 $12,160 $13,203

2009 2010 2011 2012 2013

$9,426

$9,768 $9,934 $9,893

$10,455

2009 2010 2011 2012 2013

($ in millions) Total Revenue

Noninterest Expense

PTPP CAGR (2009-2013): 19.7% (1)

(1) Pre-tax pre-provision profit (PTPP) is total revenue less noninterest expense. Management believes that PTPP is a useful financial measure because it enables investors and others to assess our ability to generate capital to cover credit losses through a credit cycle.


$3.8

$4.6

$2.4

2009

$3.1

$7.2

$2.9

2013

Transactional / Other Non-Recurring

Recurring Revenue

65%

Asset Based / Other Recurring

Net Interest $10.8

$13.2

Recurring Revenue

76%

($ in billions)

Total WBR Revenue

Executing on strategic initiatives drives plan-based advice and recurring revenue; recurring revenue has improved to 76% in 2013 from 65% in 2009

WBR growth in recurring revenue


WBR focus on disciplined expense control

$7.4 $7.1 $7.2 $7.1 $7.4

2009 2010 2011 2012 2013

WBR Non-Interest Expense CAGR: 2.6%

$9.4 $9.8 $9.9 $9.9

$10.5

Strong expense discipline as total expense growth is driven by broker commissions, while all other expenses remained flat

Broker Commissions

All Other Expenses

($ in billions)

$2.6 $2.6 $2.8 $2.8 $3.1


19.2% 18.7%

21.0%

2011 2012 2013

WBR performance measures

1.87% 1.94% 1.93% 1.75%

1.65%

2009 2010 2011 2012 2013

Net Interest Margin

5.3%

2.1%

0.3%

2.9%

2010 2011 2012 2013

Operating Leverage

Return on Equity (1)

8%

14%

17% 18%

21%

2009 2010 2011 2012 2013

Pre-tax Margin

Consistent and improving performance despite continued low short-term interest rate environment

(1) Prior years ROE not comparable due to methodology differences.


2013 Client Asset Mix

WBR client assets

Investing & Retirement Planning

$5MM-50MM

$1MM-5MM

$250K-1MM

<$250K

WBR Client Segmentation

2013

$1.6T

11%

21%

33%

24%

11%

$2.1T

Saving, Retirement Planning & Investing

dollars held away

$1.6T Diversified Client Asset portfolio with additional $2.1T asset opportunity with Wells Fargo Retail Bank customers

28%

13%

7%

52%

Cash

Equities

Other

Fixed Income

Saving

$50MM+

Affluent Asset

Opportunity


Continued growth in client demand for asset-based pricing relationships

Growth in Brokerage advisory assets

73%

27%

2013 Brokerage Client Assets: $1.4T

Advisory Assets

Other Brokerage Client Assets

27%

2013

25%

2012

23%

2011

20%

2010

18%

2009

Advisory Assets as % of Total Client Assets

Advisory Assets CAGR: 17.5%


2.75% 1.65% Net Interest

Margin

22% 21% Pretax Margin

Financial target update

2013 Results

3.0%

80% 76%

2.9%

Recurring Revenue

Operating Leverage

Long Term Targets

(est. 2012 Investor Day)

On track to reach long term targets set at 2012 Investor Day


WBR leadership We view people as our competitive advantage, demonstrated by the depth of our leadership and loyalty of our team members

David M. Carroll

Senior EVP, Wealth, Brokerage and Retirement 33 years at Wells Fargo

11 direct reports Average years at WFC ~21 years

Mary T. Mack

Head of Wells Fargo Advisors

30 years at WFC

6 Direct reports

Average years at WFC ~21 years

20,100 Total team

members Average years at

WFC ~15 years

WBR managers average 15 years with Wells Fargo

Average tenure of all WBR team members is 14 years

Jay S. Welker

Head of Wealth Management

11 years at WFC

9 Direct reports

Average years at WFC ~12 years

9,700 Total team

members Average years at

WFC ~13 years

James P. Steiner

Head of Abbot Downing 16 years at WFC

9 Direct reports Average years at

WFC ~14 years

280 Total team members Average years at

WFC ~12 years

John M. Papadopulos

Head of Wells Fargo Retirement

18 years at WFC

5 Direct reports

- Average years at WFC ~21 years

2,800 Total team

members


Mary T. Mack

Head of Wells Fargo Advisors

30 years at WFC

6 Direct reports


20,100 Total team

members


Jay S. Welker

Head of Wealth Management

21 years at WFC

9 Direct reports


9,700 Total team

members


James P. Steiner

Head of Abbot Downing 16 years at WFC

9 Direct reports


280 Total team

members



Market and Client Trends


Key market trends Despite a 5-year bull market, clients have escalating concerns about the economy, the markets and other influencing factors

Market Dynamics

• Volatility in U.S. and abroad

• Inflation concerns

• Proliferation of complex financial products

Government Programs

• Social security sustainability

• Affordable Health Care Act

• Increasing tax burden

• Partial government shutdown

Retirement Trends

• 10,000 Baby Boomers retiring each day

• Economic uncertainty

• 30+ years to live in retirement

• Traditional pensions disappearing

Healthcare Expenses

• Rising costs

• Longer life span

• Long term care insurance

62% of investors report that their fears about sustaining significant losses in a repeat of the 2008/2009 stock

market downturn have not eased (1)

(1) Source: Wells Fargo/Gallup Investor & Retirement Optimism Index February 2014.


Online/Mobile

Flood of information

Key client trends Technology and demographic trends are also fueling our clients’ need for qualified financial advice – WBR has tuned in to these insights and expanded its business model accordingly

WBR Response

Social Media

So many opinions

Household Dynamics

Modern families

Gen Y/Millenials

New to investing

Offering an intuitive online and mobile experience, integrated across channels

Helping clients make sense of the large quantity of information available

Piloting social media test with our advisors

Financial advisors are a single point of contact providing unbiased and qualified advice, with many ways to connect

Fostering diversity in our advisors’ expertise, products and services

Delivering individual and flexible solutions to keep modern-day families in good financial health

Designing a simple, friendly and fun experience for younger clients

Recruiting the ‘next generation’ of advisors

Client Trends


Our Structure, Approach

and Competitive

Positioning


Client Needs

Planning & advice

Investment management

Brokerage

Private banking

Retirement

Estate planning strategies

Trust & insurance

Starting with client needs Clients have diverse financial needs and require comprehensive solutions

WBR Offerings

Transacting

Investing Saving

Retiring Borrowing

Protecting Home

Financing


The value of planning Building relationships around individual plans drives tremendous value for our clients and the business

know where they stand in reaching their financial goals 93%

feel they are able to live the life they planned 88%

say they will retire on their own terms 91%

feel in control of their finances 89%

Planning gives clients “Peace of Mind”

….and, as a result, drives significant business value

Higher Client Loyalty 40%

Deeper Cross-Sell 38%

Higher Revenue 65%

Higher Advisory Assets 73%

Lower Attrition 47%

Source: WBR internal surveys.


Competitive differentiation Our competitive advantage is the quality and consistency of our execution

We are client-driven Ethnographic research & insights

Listen first, understand, then plan

Personalized approach & solutions

Client

Collaboration is part of our cultural DNA

Common values & personalities

Cross-enterprise teams

Shared metrics

Collaboration

Helping our clients grow is the first step in growing our business

Focus on client’s financial health

Better solutions = deeper trust = more business

Shared initiatives & success

Growth


Key Growth Opportunities

and Goals


Capitalizing on strategic opportunities WBR has launched key initiatives and partnerships to drive organic growth and generate sustained growth

Strategic Initiative Organic Growth Driver

1) Advisor Best Practices Accelerating Adoption of Best Practices

2) High Net Worth Partnership

3) Community Bank Partnership

4) Home Lending Partnership

Leveraging the Power of One Wells Fargo


UNDERSTAND

ADVISE

Advisor Best Practices opportunity

Adoption is measured by the degree to which advisors embrace proven strategies within their practice.

Commitment to understanding clients’ personal and financial

priorities

Access to a knowledgeable

advisor and team of financial

experts

Plan Investments

Protect Banking

Client Discovery

Recommended Advice

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Tailored advice that is aligned with the client’s circumstances

Solutions and relationship

evolve as the client’s life changes

Defined set of Best Practices to support advisors in helping clients succeed financially


Advisor Best Practices proven strategies Best Practices strategies in four key areas have the greatest impact on the client

experience and advisor productivity

Best Practices advisors set realistic and appropriate service standards for each client segment.

Service Matrix

Best Practices advisors begin with a plan and provide on going guidance to address the client’s complete financial picture (needs, goals, planning and progress).

Advice-led relationships

Best Practice Advisors have a standardized process to review client results.

Standardized reviews

Best Practices advisors maintain the size of their practice to ensure they can commit the time and resources needed to provide trusted advice and serve the client’s full range of financial needs.

Right-sizing


16%

26%

34%

48%

11% 12% 13%

19%

2009 2010 2011 2012 2013

54%

70%

Non-Best Practices

Best Practices

0

2,000

4,000

6,000

8,000

2010 2011 2012 2013

Advisor Best Practices progress The number of advisors adopting Best Practices within WFA has tripled, resulting in 30%

greater client loyalty and 2.5 times advisor productivity growth

Productivity Growth Client Loyalty % Loyal to the Firm

Advisor Adoption

Advisor adoption 3x higher in 4 years

Clients are 30% more loyal when advisors use best practices

(1) Advisor productivity growth includes producing FAs with the firm from 2009 – 2013.

Advisors (1) applying best practices grow production 2.5x greater

BP Adopter

BP Non-User


High Net Worth partnership

(1) 2014 Offering Expansion.

WFA, in partnership with Wealth, is satisfying High Net Worth clients’ complex financial needs through local in-market specialists delivering customized financial services

Capitalizing on Brokerage High Net Worth opportunity

Targeting 13,000+ Qualified HHs with $5MM+ AUM

Qualified HHs hold >$150 billion AUM

Client’s Attorney

Client’s CPA

WM Specialists

Financial Advisor Relationship Manager

Private Banker Lending Specialist

Planning Specialist (1) Trust & Fiduciary Specialist

Partnership Model


1.3

11.7

The partnership was launched as a pilot in late 2010, full roll-out completed late 2012, and has demonstrated strong early results

High Net Worth partnership progress

$1.3

$1.9

$0.9

2013 Client Balances ($ in billions)

Target Households (1)

13K

… has penetrated 10% of households…

Existing Households

Potential Households Brokerage Assets

Credit Balances

Trust Assets

… yielding $4.1B in incremental client balances.

The participation of approximately 500 Financial Advisors...

(1) Target households (defined as $5MM+ in AUM with WBR).


WBR/Community Bank partnership - growing affluent opportunity

Increasing the savings, retirement planning and investing solutions for retail bank households to match households in our affluent customer segment is an estimated $2.1T in deposits and assets under management

2012 Investor Day

$1.5T

$2.1T


Saving

Current


dollars held away


dollars held away


Saving


WBR/Community Bank partnership Significant growth opportunities for both businesses – great source of new highly profitable clients with enhanced retention

Clients with both bank and WBR relationships meet a greater number of financial needs with a deep relationship within those needs

Client retention averages 98.5% (1) for clients with both bank and WBR relationships

Client Needs

Transacting

Investing Saving

Retiring Borrowing

ProtectingHome

Financing

Clients with both bank and WBR products are over five times more profitable than bank only, and over two times more profitable than WBR only

BankOnly

WBR Only Bank &WBR

Relative Client Profitability (2)

1.0x

5.4x

2.5x

(1) Client retention averages represent two years-ending 2013. (2) Relative client profitability as of December 2013 (annual profit).


WBR/Community Bank partnership Targeted execution to capture $2.1 trillion affluent asset opportunity

Identified approximately 1,100 retail banking stores as high opportunity

Households with approximately $1.0 trillion of $2.1 trillion affluent assets held elsewhere

These locations have 3x affluent households than other stores

Staffing these stores with a team of store private bankers and financial advisors

Progress in building teams in all stores (since 2011)

PrivateBankers

FinancialAdvisors

+28%

+13%


WBR/Community Bank partnership Demonstrated capability to collaborate and serve customers effectively to achieve growth

Bank customers contribute significantly to brokerage growth:

Investment assets referred to Brokerage up 31% CAGR since 2011

Approximately half of new organic Brokerage clients in 2013 are also Community Bank customers

Other Brokerage

Clients 65%

Brokerage Client Assets: $1.4T

Bank/

Brokerage

Clients

35%

Total Brokerage client assets up 21% since 2011

- Bank/Brokerage client assets up 29%

Bank/Brokerage client asset share increased from 33% in 2011 to 35% in 2013


(1) Based on 12-month look-back on client balances for referrals from Home Lending to WBR.

WBR New Business Growth 2010-2013 from Mortgage Referrals (1)

Investments

CAGR 23%

Deposits Borrowing

CAGR 9%

CAGR 39%

Home Lending originated $35 billion in agency and

portfolio mortgages for WBR clients in 2013

- Origination mix comprised of 64% agency

and 36% portfolio mortgages

WBR portfolio mortgage balances have 19% CAGR

since 2010

CAGR 19%

WBR Lending Portfolio Growth 2010-2013

Long-standing partnership supports client referrals for residential loans through Home Lending and planning and investments through WBR

Home Lending partnership growth


Home Lending to WBR

Home Lending provides financing to 3.7 million affluent

households (1), but only 11% work with Wells Fargo for

planning, investing and retirement needs

As of 12/31/2013. (1) Affluent are WF Home Lending households (HHs) with total Wells Fargo combined deposit and

investment balances greater than $100K or total deposit and investment balances of $100K.

89% or 3.3MM

Affluent HH have no WBR

relationship

71% or 1.4MM WBR HH have a

non-WF mortgage

Home Lending partnership potential WBR cross-sell and client service opportunity with Home Lending is significant

WBR to Home Lending

Over 2 million WBR clients hold a U.S. residential mortgage,

but only 29% have a mortgage with Wells Fargo

Keys to Success

Managing a seamless client experience for new and existing

clients provides catalyst for growth

Selected activities include training, coaching and co-location

of WBR and Home Lending team members, and enhanced

recognition, service/relationship benefits for shared clients

29% or 573K

WBR HH have a WF mortgage

11% or 420K

Affluent HH have a WBR relationship


Long Term Targets

(est. 2012 Investor Day)

Updated Long Term Targets (est. 2014 Investor Day)

80%

3.0% 2.9%

76% 80%

3.0%

22% 21% 25% Pretax Margin

Recurring Revenue

Operating Leverage

2013 Results

2.75% 1.65% 2.75% Net

Interest Margin

Financial target update Continued focus on pretax margin expansion

Wealth, Brokerage and Retirement (WBR) 37 Wells Fargo 2014 Investor Day

Biographies


David Carroll provides executive leadership to the wealth management business of Wells Fargo, including private banking and trust and estate services; brokerage services, including retail brokerage; Abbot Downing, which serves the needs of ultra high net-worth families and individuals; and retirement, including its institutional recordkeeping business.

A 33-year financial services veteran, he joined Wachovia Bank & Trust Company in 1979 and then First Union Bank (Wachovia’s predecessor) in 1981. In 2005, he became senior executive vice president and head of Wachovia’s Capital Management Group, which included retail brokerage (Wachovia Securities), asset management (Evergreen Investments), and Retirement and Investment Products. Previously, he was head of corporate services and merger integration, chief of eCommerce and technology, and head of First Union’s General Banking Group regions in Florida and Georgia.

He earned his bachelor’s degree in business administration from the University of North Carolina at Chapel Hill. He serves on the Board of Visitors at the Kenan-Flager Business School at the University of North Carolina at Chapel Hill and is on the Executive Board of Educational Foundation, Inc.

David Carroll Senior Executive Vice President: Wealth,

Brokerage and Retirement


Mary Mack Executive Vice President, Wells Fargo Advisors

As President and Head of Wells Fargo Advisors, LLC, Mary Mack leads one of

the nation’s largest full-service retail brokerage organizations. She is a 30-year veteran of the company and has a broad mix of brokerage/advisory, banking and finance experience.

Most recently, Mary led the Financial Services Group and was responsible for the strategic direction and management of investment, advisory and banking products; the firm’s research and advice model; Financial Advisor (FA) recruiting; FA productivity and development; and the client and FA platform. Joining Wells Fargo Advisors through the mergers of Wachovia and First Union, Mary has held a variety of leadership positions including the head of Wealth Brokerage Services (bank/brokerage channel); leader of Wachovia’s Client Partnership; director of Community Affairs; General Bank regional president; and managing director of Healthcare Corporate Banking.

A graduate of Davidson College with a bachelor’s degree in International Political Economy, Mary also serves on the college’s board of trustees. She has served on the board or executive committee for Johnson C. Smith University, the United Way of Central Carolinas, Junior Achievement, Childcare Resources, and the Arts & Science Council. She is a founding member of the Foundation for Fort Mill Schools. Mary currently serves on the Private Client Services Committee for the Securities Industry Financial Markets Association and was named to the top-ranked Most Powerful Women in Banking Team by American Banker magazine two years in a row. Mary holds Series 7, 63 and 24 registrations.

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