According to Yahoo Finance, a number of Wells Fargo (WFC) advisors who used to work for the Private Bank’s wealth management unit are claiming that the firm pushed them to place client funds in investments that charged higher fees to clients. The ex-bank employees contend that they were pressured to cross-sell products and bill clients for fees that they would not have had to pay otherwise.
Yahoo Finance reported that there are internal company documents verifying the former employees’ claims. The media outlet said that it conducted interviews with a number of these former advisors.
The ex-Wells Fargo advisors were reportedly encouraged to place clients’ funds in complex products and separately managed accounts. The advisors claim that they were told that if they did not meet sales quotas for certain products, their compensation would suffer.
It is important to note that any of the firm’s advisors that place their interests over that of their clients is breaching their professional obligation to place the client’s best interests first.
The Added Fees Made Wells Fargo More Money While Costing Clients
Yahoo Finance reports that the firm had a presentation document that instructed Private Bank advisors to make sure that for every Investment Strategist, there had to be “at least 4 private placement purchases.” Also, each Investment Strategist had to have “at least 3 new third party separately managed accounts.” Advisors were told that it was mandatory that 20% of accounts with more than $500,000 of equities had to have an options strategy offered.
While an options strategy may be appropriate for some clients, options are not appropriate for many, if not most, investors. Options come with added fees that are significantly more than the average asset fee. Such fees mean more revenue for the company.
The bank, however, claims that in most instances, clients are given rebates of fund fees and that only a “small number of certain funds” pay Wells Fargo compensation for services rendered. The firm said that these fees are disclosed to the clients, who have agreed to them.
Separately managed accounts also charge substantial added fees. For example, according to the ex-advisors, the company had been known to charge some clients brokerage commissions, in addition to the yearly fee that they pay for portfolio management.
In meetings called “Client Discovery Reviews,” clients were informed where they might benefit from more services or products. These ex-advisors, along with others, believe that this was yet another sales attempt rather than reviews conducted to help clients.
Additionally, ex-Wells Fargo advisors have indicated that bank rules meant they also must generate further business through mortgages, loans, and wealth-planning products, regardless of whether those bank services and products were in a client’s best interests.
Wells Fargo Advisors Take Their Complaints to the Government
Early this year, in March, the firm announced in a securities filing that the bank’s board was investigating whether its Wealth and Investment management business had made “inappropriate referrals or recommendations.”
The disclosure came two months after two of the company’s financial advisers sent a complaint to the U.S. Securities and Exchange Commission (“SEC”) detailing their concerns with how the bank worked with its wealth-management clients and six months after four other financial advisers sent a similar letter to the SEC and the Department of Justice.
Sadly, such negative information concerning Wells Fargo and its advisory business have become commonplace over the last few years as the bank and brokerage try to restore their names.
Please contact Shepherd Smith Edwards and Kantas if you believe your investment losses may be due to a Wells Fargo investment adviser mishandling your portfolio. Our investor lawyers can help you explore your legal options.
Wells Fargo pushed wealth advisors to use high-fee products, cross-sell, Yahoo Finance, August 21, 2018
Whistleblowers Detail Wells Fargo Wealth Management Woes, Wall Street Journal, July 27, 2018
More Blog Posts from SSEK Law Firm:
Massachusetts Investigates Wells Fargo Advisers, March 16, 2018
Ex-Wells Fargo Broker Barred for Alleged $180K Elder Financial Fraud, February 26, 2018
SEC Orders Wells Fargo Advisors to Pay $3.5M Penalty, November 13, 2017