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Wells Fargo Outlines DOL, Tech Plans; Departures Continue

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Wells Fargo Advisors recently explained to its employee and independent registered reps that it plans to keep offering commission-based retirement accounts. The news comes as legal and political challenges to the Department of Labor’s new fiduciary standard — set to begin going into effect in April — continue.

“WFA strongly believes that our clients deserve options when making their investment decisions. Therefore, we will continue to offer traditional commission-based retirement accounts leveraging the Best Interest Contract (BIC) Exemption, as well as advisory solutions,” the broker-dealer said in a memo sent to advisors in early December, including those with Wells Fargo Financial Network, or FiNet, its independent channel.

Rivals such as Morgan Stanley and Raymond James also are taking such an approach to DOL, while Merrill Lynch is ending commissions in new retirement accounts. Merrill says clients can, for instance, move their brokerage IRA accounts to Merrill Lynch One, its investment advisory program that offers a single, asset-based fee schedule.

“WFA is implementing several enhancements to help ensure we are meeting the DOL’s best interest standard when advising and servicing our clients’ retirement accounts,” the bank explained.

In terms of how the presidential election results will affect the new fiduciary standard, “None of us can say with certainty what will actually happen. Many different types of scenarios are possible, and we are planning for all of them. In the meantime, we will continue preparing for an April 2017 implementation” of the DOL fiduciary rule, it added.

Wells Fargo’s roughly 15,100 advisors and 3,900 licensed bankers have some $1.5 trillion in client assets.

Talk to Clients, Document That Discussion

The firm’s retirement clients will receive a new retirement account policy statement in the second quarter of 2017. “Before this mailing occurs, it is critical that FAs have conversations with clients and document their discussion in SmartStation Client Dashboard,” according to the broker-dealer.

Wells Fargo says it also is creating “a standardized process to document and help demonstrate when 401(k)-to-IRA rollovers and IRA-to-IRA transfers are in the client’s best interest.”

In addition, WFA says it has developed a “firm-approved list of available investments for retirement accounts” based on research from Wells Fargo Investment Institute and other groups within the bank.

“In the coming weeks, you will continue to receive more detailed information outlining specific steps to take before […] April 10, 2017,” it concluded in its memo.

Merrill’s No Mutual Funds Policy

The DOL rule is keeping firms and their advisors busy.

For instance, less than a month after telling its advisors that it would not offer new advised, or commission-based, brokerage retirement accounts starting in April 2017, Bank of America-Merrill Lynch said Nov. 2 that effective immediately purchases of mutual funds in existing IRA accounts are no longer allowed.

Mutual funds can be bought in Merrill Lynch Investment Advisory Program (IAP) accounts and nonretirement brokerage accounts. For advisors, the shift means that commissions tied to mutual fund sales in brokerage retirement accounts will no longer be part of their compensation plans.

“We are implementing this decision in advance of the DOL rule’s applicability date, to ensure as seamless and positive experience for our clients and advisors as possible,” the firm explained.

According to Merrill, clients looking for alternatives to commission-based funds in their IRAs can turn to the firm’s IAP, Merrill Edge Select Portfolios, the Merrill Edge self-directed channel and Merrill Edge Guided Investing (beginning in January). “Each of these offerings will be augmented on an ongoing basis to ensure choice for our clients,” it said.

Commonwealth Financial Network said in late October it would no longer offer commission-based products in retirement plans as of Dec. 31.

Moving in a different direction, Cambridge Investment Research has said it will continue to offer commission-based retirement accounts after the new DOL fiduciary rule goes into effect next year. Additional firms making similar announcements — beyond Morgan Stanley and Raymond James — include Ameriprise Financial and Cetera Financial Group.

Wells Fargo and SigFig

Borrowing a page from a wirehouse rival, Wells Fargo Advisors has said it is partnering with the tech firm SigFig to develop a robo offering, which it plans to try out next year. The news comes about six months after UBS’ wealth management group in the Americas said it struck a deal with SigFig to work on a variety of digital tools for its reps and advisory business.

“As we continue to invest in technology that serves the evolving needs of our clients and our advisors, this offering will mark an important step forward in delivering financial advice to the next generation of investors, while building a long-term pipeline for our full-service business,” explained David Carroll, head of Wealth and Investment Management at Wells Fargo, in a statement.

According to Wells Fargo, its work with SigFig will allow it to offer “tailored portfolios” online and a service for “emerging investors who want trusted investment advice and a holistic financial experience in the digital space.”

“Given the scale of Wells Fargo, this partnership will help SigFig continue to significantly expand our mission of providing high-quality investment advice to investors of all wealth and income levels,” explained SigFig CEO Mike Sha in a statement.

Advisor Movement

With Wells Fargo Advisors’ parent company still in the headlines over issues tied to its $185 million settlement with the Justice Department concerning as many as 2 million allegedly fake accounts, its registered reps are being urged to depart to other firms.
LPL Financial, for instance, recruited 11 advisors from Wells Fargo in the third quarter of 2016. This is about 8% of the 136 advisors moving to the independent broker-dealer in the three-month period ended Sept. 30.

The Cook Financial Group of Indianapolis, which has about $1.7 billion of client assets, recently announced plans to move to Noyes, an employee-owned wealth management and investment-banking firm. Its members have a combined total of 200-plus years of industry experience.

“The partnership will primarily empower Cooke to do more for their clients and concurrently attain a series of key strategic goals,” said L.H. Bayley, chairman of the Noyes board of directors, in a statement. “These include: expanding family office capabilities, offering clients additional investment opportunities leveraging Noyes Capital Markets’ capabilities and expertise, while boosting growth by acquiring firms or teams with [complementary] offerings.”

In other news, Wells Fargo Advisors has agreed to pay a $1 million fine to the Financial Industry Regulatory Authority to settle allegations that it failed to adequately supervise advisors’ use of consolidated client reports from mid-2009 to mid-2015.

Other Teams

Meanwhile, Raymond James Financial says a team of advisors with about $200 million in assets has joined its employee-advisor channel in Savannah, Georgia, after leaving Wells Fargo Advisors. Advisors Benjamin Price, Cal Batchelor and Anson Kanoy now operate as Price, Batchelor and Kanoy Wealth Management.

Price spent 15 years in retail banking in Savannah prior to working for the Robinson Humphrey Company. Batchelor began his career with A.G. Edwards in 1994 and has remained with the firm, while Kanoy came on board the group in Savannah in 2008, partnering with Price in 2001.

“We are delighted to welcome Ben, Cal, Anson and Nancy to the Savannah office of Raymond James,” Savannah branch manager Tom Hussey said in a statement. “With their years of experience and a demonstrated commitment to a long-term, client-first approach, they are a great addition to our firm, and we look forward to supporting them as they continue to grow their business.”

A team also left Wells Fargo to join RBC Wealth Management in Chicago. Heide Wealth Management, led by David Heide, has a total of six advisors, about $500 million in client assets and $4 million in yearly fees and commissions.

“David Heide and the Heide Wealth Management Group are seasoned professionals and bring a breadth of wealth management experience and expertise to the firm,” said Burton Street, director of RBC Wealth’s Chicago complex, in a statement.

Heide began his career in financial services at Edward Jones in 1990 and five years later moved to A.G. Edwards in 1995 (which was acquired by Wells Fargo in 2008), according to FINRA BrokerCheck. He serves as the past president of the Moraine Valley Community College Foundation and current president of the Bridge Teen Center board.


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