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Wells to raise minimum stock commission size for FAs

A customer uses an ATM machine at a Wells Fargo bank in Los Angeles, Calfornia March 8, 2012. REUTERS/Fred Prouser

By Jed Horowitz

(Reuters) - When the almost 11,000 financial advisers in Wells Fargo & Co's branch brokerage system get their 2015 compensation plan on Wednesday they may grimace at one change that could hit their pay, or cost their customers a little more.

Wells is raising the minimum commission size on which it will allow brokers to be paid on a stock trade to $125 from $95, according to people familiar with the plan. Wells brokers, who receive 50 percent of most of the commissions they charge, risk customer backlash for the higher charge.

A $30 rise in the so-called ticket charge may not sound egregious but transactions can quickly add up. For example, a broker closing out a $400,000 managed account portfolio of a deceased client or rebalancing positions could easily execute 50 transactions, costing an extra $1,500, said one of the sources.

Brokers at Wells and other full-service firms still have leeway to offer discounts to selected clients from published rates, but all firms are putting constraints on behaviors that they say erode profitability.

Morgan Stanley, the largest U.S. brokerage firm with more than 16,000 advisers, for example, does not credit brokers for purchases or sales of securities that trade below $1 a share or on products, other than options, that have commissions under $100 a trade, according to its 2015 compensation plan.

Wells is the last of the four big U.S. brokerage firms to issue its annual compensation plan, a document that can run dozens of pages and is scrutinized internally and at competitors to see where the most attractive deals lie and what sales behaviors are being encouraged or discouraged.

Morgan Stanley, Bank of America's Merrill Lynch Wealth Management and UBS Wealth Management Americas distributed plans in the past month that offer inducements for working on teams and penalties for discounting fees and commissions and for working with small accounts.

In addition to raising its compensable trading ticket size, the new Wells plan will make it more remunerative for lower-producing brokers to work on teams, the sources said. Some Wells brokers have complained that the firm was constraining their ability to manage their teams.

Full-service firms are promoting teams as a superior way to handle the sophisticated needs of wealthy clients, with the added benefit of making it harder for teams to bolt en masse to competitors.

(This version of the story has corrected the headline to say Wells Fargo is not changing commission rates but raising minimum commission size for broker payouts)

(Reporting by Jed Horowitz in New York; editing by Andrew Hay)