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Money Management

Wells Fargo exec: Sale of asset management unit not in the cards

Wells Fargo & Co. might be preparing to offload its institutional retirement and trust business in a $1.2 billion deal, but the move, and other efforts to streamline its business, aren't an indication that the firm is considering putting its asset management unit on the chopping block next, a company executive said.

Jonathan G. Weiss, senior executive vice president and head of the wealth and investment management division, which includes Wells Fargo Asset Management, said "there's a lot of reasons that we like the business and we're not looking to sell it."

"We think it has scale. We think it has synergies with the rest of our wealth businesses," Mr. Weiss added. "It's an intellectual capital business, and we like that. It's profitable."

Less than a week before Wells Fargo announced April 9 it was selling its institutional retirement and trust business to Principal Financial Group, the firm detailed a brand redesign for WFAM, which included consolidating the online presence of its various asset management brands.

As part of the branding campaign and redesign, the three websites for WFAM, Wells Capital Management and Wells Fargo Funds Management were consolidated into one, an April 4 news release said.

According to Mr. Weiss, while the firm has done a lot of work to make WFAM more integrated over the past couple of years, it also sees room for future growth by attracting new talent and adding investment strategies to its lineup.

As of March 31, San Francisco-based WFAM reported $476 billion in assets under management, down 4% from the previous year, primarily due to equity and fixed-income net outflows and the sale of WFAM's ownership stake in The Rock Creek Group, the firm's first-quarter earnings release said.

Asset cap

Another reason the asset management unit is seen as a boon to the company is because the unit is "free to grow the business in a thoughtful, disciplined way," Mr. Weiss said.

In February 2018, the Federal Reserve placed a growth restriction on Wells Fargo in light of the retail banking cross-selling scandal. The asset cap remains in place, prohibiting Wells Fargo from growing beyond $1.95 trillion in assets.

"It's not especially constrained by the asset cap — and it's in fact one of the reasons we like the (asset management) business, because we can grow assets under management in an off-balance-sheet manner," Mr. Weiss said.

That fact doesn't account for the fallout from Wells Fargo's sales scandal, however, which has affected other areas of the business, including asset management.

The former CEO of Wells Fargo Asset Management, Kristi Mitchem, told Pensions & Investments in July 2017 that the retail banking sales scandal resulted in the loss of a few clients at WFAM but had a bigger impact on prospective institutional clients.

"I do believe the impact on the asset manager has been very limited," said Ms. Mitchem at the time. "But if you're asking me where we have felt it, it's not with existing clients — it's with prospects."

Ms. Mitchem left the firm in late January to join BMO Global Asset Management as CEO.

In an April 18 interview, Mr. Weiss admitted that WFAM is still fielding questions from institutional clients about the scandal.

"Yes, we've fielded questions over the course of the last couple years on our reputation," he said. "Those are very reasonable questions for people to have. Some clients are no doubt more concerned about them than others, but for the most part, we've been very pleased with the ongoing dialogue and support we've had with our clients," Mr. Weiss added.

New leadership

Following the January departure of Ms. Mitchem, which Mr. Weiss said was "her decision and a surprise decision," WFAM appointed global CIO Kirk Hartman and Nicolaas Marais, president and head of multiasset solutions, as interim co-CEOs of the asset management business.

"We named them on an interim basis because we didn't want to drag things out by finding a permanent head without providing that leadership right out of the blocks. That gave us more time to think in an unhurried way about what the right long-term structure would be," Mr. Weiss said.

He confirmed that Wells Fargo is focused on looking within its talent pool for its next asset management leader as "there's no lack of internal talent."

In a move to transform the larger Wells Fargo & Co. business, however, the company is going a different route with its search for a new chief.

On March 28, Timothy J. Sloan stepped down as president and CEO of Wells Fargo & Co. The company said in a news release it would look outside of the firm for a permanent replacement, while naming C. Allen Parker, the company's general counsel, as interim president and CEO.

At the asset management unit, "one of the legacies Kristi left us was a very talented bench," Mr. Weiss said. The firm has "both people who had been here for a long time and people who joined us recently under her leadership," such as Mr. Marais, who started in February 2017.

According to Mr. Weiss, the firm is on track to appoint permanent leadership for the asset management unit in the first half of the year.