WELLS FARGO & COMPANY NEW YORK (Reuters) - Sales of mutual funds and other managed accounts by Wells Fargo & Co's (>> Wells Fargo & Co) more than 15,000 retail brokers drove a 22 percent gain in net income at the bank's "wealth, brokerage and retirement" segment in the third quarter.
Profit at the wealth unit, the smallest of the U.S. bank's three businesses, jumped to $550 million from $450 million a year earlier, Wells said on Tuesday.
Wells' wealth, brokerage and retirement sector includes financial planning advice for wealthy investors as well as brokerage services and retirement and trust services for individuals and companies.
Like many brokerage firms, Wells has been steering financial advisers to sell investment packages managed by outside advisers rather than touting individual stocks and bonds. Managed products offer diversification for investors as well as marketing and service fees from the outside funds and advisers for banks. They also allow brokers to spend more time on client service and prospecting and less on investments, according to brokerage executives.
Managed accounts also help insulate brokers and their firms from client complaints when individual investment recommendations go awry.
Assets in managed accounts of brokerage clients climbed 17 percent in the third quarter to $409 billion even as Wells' brokerage force dipped 1 percent to 15,163 advisers. Wells remains the second-largest U.S. brokerage by number of brokers behind Morgan Stanley (>> Morgan Stanley), which has not yet reported third-quarter results.
Total client brokerage assets were up 8 percent from a year earlier to $1.4 trillion as of Sept. 30.
Fee revenue based largely on assets held in client accounts were a major contributor to the wealth unit's 7 percent rise in quarterly revenue to $3.6 billion, Wells said. Fees were spurred by stock market gains as well as new sales. Wells prices managed account fees at the start of each quarter, meaning third-quarter fees reflected account values as of June 30.
Expenses in the wealth businesses rose 3 percent to $71 million due in large part to increased broker commissions even though transaction revenue fell.
Like Bank of America Corp (>> Bank of America Corp), UBS AG (>> UBS AG) and other banks with big wealth networks, Wells encourages its advisers to sell mortgages, portfolio-secured loans and other banking and insurance products. Average net loans in the third quarter increased 13 percent from a year earlier and 3 percent from the second quarter to $52.6 billion.
Money set aside for possible loan losses in the wealth unit grew $13 million from a year earlier, but, in a sign of improving credit, were well above the amount of loans that Wells charged off during the quarter. Charge-offs of bad loans fell throughout the bank, which is the world's biggest mortgage and auto lender.
Assets in individual retirement accounts managed by Wells grew 8 percent from a year earlier to $354 billion, while assets in institutional retirement plans the bank oversees rose 6 percent to $314 billion.
(Reporting by Jed Horowitz; Editing by Lisa Von Ahn)
