Wells Fargo Wealth Probe Will Hurt Recruitment
Wells Fargo’s wealth management business could have a harder time recruiting and retaining advisors as a result of the recently revealed investigation into the unit’s sales practices, experts tell ThinkAdvisor.
The company’s investigation into inappropriate recommendations or referrals of 401(k) plans and certain alternative investments as directed by the Justice Department in late 2017 “is a big deal,” recruiter Danny Sarch of Leitner Sarch Consultants tells the publication.
Financial services firms also don’t typically hire the law firm Shearman & Sterling “casually,” he tells ThinkAdvisor. The firm is purportedly handling the investigation for Wells Fargo. Sarch says he’s talked with three Wells Fargo reps who could jump ship, according to the publication.
“Ongoing issues” such as the ones that allegedly occurred in Wells Fargo’s wealth unit hurt an advisor’s ability to keep and attract clients, so the company is going to feel the impact in recruiting and holding on to advisors too, Chip Roame, head of Tiburon Strategic Advisors, tells ThinkAdvisor.
Even though advisors may not be surprised by certain errors such as “problematic fee calculations,” prospects may view such occurrences as something “sneaky” and advisors don’t want to have to explain them to clients, he tells the publication.
On the other hand, the investigation may only be looking at the “fringes” of the wealth unit’s overall business activity, ThinkAdvisor writes. After all, the alternative investments that are part of the review of rollovers make up a small fraction of the wealth unit’s business, Andy Tasnady of the compensation consulting group Tasnady and Associates tells ThinkAdvisor.