Details Emerge on Troubles at Wells Fargo Wealth Unit

In addition, there were quotas tied to alternative investments involving hedge funds and private equity, for instance, the paper says, citing employees and internal bank documents; investments in products like the GAI Agility Income Fund and GAI Corbin Multi-Strategy Fund, majority owned by Wells Fargo, meant the bank was able to pick up management fees. The bank, though, says that all clients did pay such fees and that some fees are being refunded.

The Scene in Phoenix

In one area of Phoenix, the East Valley, advisors had yearly sales goals of $64,000 for private-bank clients with more than $2.5 million on the Investment Fiduciary Services platform, the paper says. Those who missed the target could not stay in “top branches.”

One former regional manager, Mahes Prasad, left the bank earlier this year, and his Financial Industry Regulatory Authority records state that he was under review for alleged “inappropriate referrals or recommendations or whether he failed to supervise any inappropriate referrals or recommendations.”

Prasad told the Journal that he quit for “personal reasons” and did not push advisors to “sell, refer or recommend inappropriate solutions to clients or move advisors to other branches if they didn’t achieve sales goals,” according to the paper.

From 2012 and 2015, some Wells Fargo advisors were able to earn bonuses of 15% or more if they increased revenues by 15% each year, and the bank put aside some $250 million for these Growth Awards, the Journal says. However, some advisors “used loopholes to reach the lofty — and in some cases unattainable — goals, [and] Wells Fargo had to pay out more than $750 million between 2012 and 2015.”

The year 2015 was known as “the year of the annuity,” for instance, and some advisors moved clients out of annuities with sizable surrender charges into other products that had yearly fees of 1% to 1.5%, employees told the paper.

There also appear to be problems tied to Envision plans, which focused on clients’ life goals and helped some advisors earn higher payouts via deferred compensation, according to the report. Wells Fargo employees added incorrect or made-up details to inflate their numbers.

“At Wells Fargo Wealth and Investment Management, we are committed to taking care of our clients’ financial needs every day and take seriously our responsibility to help them preserve and invest their hard-earned savings,” the bank said in a statement. “Our primary goal is to be a trusted advisor to our clients and to act in their best interest. We have supervisory processes and controls in place; if a team member were to act in a manner not in line with our values and our policies, we would take appropriate action.”

At least one advisor disagrees. Commenting on the Journal’s website, Zeb Long explained: “When I was  an advisor with AG Edwards, they always said, ‘Your clients are yours, do what you think is best for them.’ When Wachovia/Wells Fargo bought A. G. Edwards [in 2008], they basically said, ‘Your clients are really our clients. Put them onto our platforms.’ “