A clearer picture is emerging about how aggressive sales goals may have caused problems for clients in Wells Fargo’s wealth management unit, according to a lengthy report Friday in The Wall Street Journal.
(Check out Investment Advisor magazine’s latest cover story, When Will Wells Fargo’s Scandals End?)
Financial advisors encouraged investors to move funds into products in order to generate extra fees, more revenue and larger bonuses, the paper said, after speaking with some 25 former employees and reviews bank documents. Wells Fargo Private Bank clients, for instance, were urged to put their money into alternative-investment funds owned by the bank.
“We are committed to thorough reviews of Wealth and Investment Management …,” the bank said in a statement shared with ThinkAdvisor. “Our top priority is to rebuild trust with all of our stakeholders. … We are making significant progress in our work to identify and fix any issues, make things right, and build a better, stronger company.”
What Your Peers Are Reading
This investigation of issues was first disclosed by Wells Fargo in a regulatory filing on March 1. This was about six months after four Wells Fargo financial advisors in Arizona reached out to regulators about issues within the unit and two months after two FAs in California sent a formal complaint to the Securities and Exchange Commission in which they alleged similar problems.
“The investigations show the difficulties Wells Fargo is facing as it tries to put its sales-practices problems behind it,” the Journal explained. The concerns cited with the bank’s wealth-management division also highlight how pervasive issues at Wells Fargo have become.”
Some clients in the wealth unit had their assets moved between certificates of deposit and structured notes or invested in ways that would allow Wells Fargo to earn higher fees, former and current employees told the paper.
Such activities involved “unclear fee arrangements,” according sources who spoke with the Journal. After getting the client’s initial sign-off, advisors often would “make multiple changes to accounts without having to update the customer” and that led to more fees.
Wells Fargo disagrees with this characterization. Across the Wealth and Investment Management unit, the bank said: “While different types of accounts have different fees, all fees are fully disclosed. We are committed to transparency as we work with our clients to help them realize their financial goals.”
The paper’s report highlights how the private bank came in for special attention: Clients with $2 million or more in assets were pushed onto the higher-fee Investment Fiduciary Services platform.