It has been four years since two big banks—Wells Fargo and Bank of America—first announced commission-free trading for ETF investors. Of course, a lot of strings were attached. Some of those have since changed, but Wells Fargo appears to still be the most flexible. (See related column here.)

Anyone thinking about using ETFs more widely due to the commission-free trading platform at Wells Fargo might be interested to know what’s going on in these times of financial failures. In short, the bank has been through (sometimes self-inflicted) hell.

Overall, Wells Fargo’s losses last year were the third-worst globally in that sector. The two bigger losers were the Royal Bank of Scotland and Citigroup. Together, the top three lost a combined $160 billion. As noted in the Economist magazine, that was more than the gross domestic product of Egypt.

Nevertheless, it has decided to expand into investment banking, using many of the resources acquired through the $15.1 billion deal for Wachovia last year. A big attraction was the increased numbers of brokers that Wachovia networks into Wells Fargo—not only for investment banking, but also to boost advisement services.

In fact, if you add into the mix the 2007 purchase of the A.G. Edwards advisory network, Wells Fargo’s presence in ETFs is about to take a huge leap forward. Consider that, by some estimates, Wells Fargo had around 2,000 advisers using its platform to transact stocks, bonds, mutual funds and ETFs. That figures to swell to some 16,000 with Wachovia and A.G. Edwards thrown into the mix.

Bigger Plans In ETFs

The Wachovia deal got the most attention because Citigroup had originally struck an agreement to buy the struggling franchise. If you remember at the time, Wells Fargo’s swooping in to snag the bank brought down a host of attention from regulators and Citigroup shareholders.

However, in terms of ETF product lines, the A.G. Edwards move could prove more significant. “The combination of Wells Fargo and Wachovia was a big deal that made the combined company a major player,” said Bing Waldert, an analyst at Cerulli Associates. “But the A.G. Edwards acquisition takes them to a whole new level.”

Now, he says a bigger Wells Fargo brokerage network will compete directly against the combined Merrill Lynch and Bank of America set of advisory services. It will also have the manpower and resources to take on the recently formed joint venture between Smith Barney and Morgan Stanley in brokerage and advisory markets.

This summer, Wells Fargo is planning to complete most of its rebranding and integration of A.G. Edwards and Wachovia operations and services. Reports are surfacing of back-office problems that are causing transaction mistakes and other unusual problems for advisers and their clients. The bank says it has formed a group aimed at heading off future merger-related headaches. And for their part, Wells Fargo officials haven’t been denying that they’ve got a big task on their plates.

Wells Fargo declined to comment for this column. A spokeswoman deferred any interviews until after the merger process is completed.

If Wells Fargo can wind up its integration soon without too many hassles, more consolidation looms on the horizon for the industry on the whole. And that likely means more pressure on independent advisers, as big banks and brokers fight back against growing legions of independent advisers.

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