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Massachusetts Regulator Probes Wells Fargo Advisors

March 9, 2018

Days after Wells Fargo Advisors announced an internal investigation of rollover and sales practices, Massachusetts’ top security watchdog has opened its own investigation of the brokerage business, Reuters reports.

The office of the Massachusetts Secretary of the Commonwealth William Galvin has asked Wells Fargo about the scope of its investigation, which was prompted by a late-2017 directive from the Justice Department, according to the news service. The company’s investigation focuses on allegations that its reps made inappropriate recommendations or referrals connected to 401(k) rollovers and alternative investments, recommendations to transition brokerage accounts into fiduciary accounts, and calculations of fees in certain fiduciary and custody accounts. But Galvin’s interest in Wells Fargo Advisors also has much to do with the unauthorized account scandal that hit Wells Fargo’s retail back in 2016, according to Reuters.

“Wells Fargo’s recent banking scandal, which involved opening bogus accounts for their customers, leads me to believe that where there is smoke, there’s fire,” Galvin says in a statement cited by the newswire. “I need to be assured that Massachusetts residents haven’t been burned by corporate greed.”

Wells Fargo’s wealth management business, unlike its banking arm, has mostly avoided the heightened regulator scrutiny following the bogus account scandal until the Justice Department directive at the end of last year. Nonetheless, the wealth unit has had a tough time holding on to and attracting reps ever since the company settled with regulators for $190 million in September 2016. Wells Fargo Advisors continuously lost advisors ever since, except for a small uptick in the third quarter of 2017. Experts have said that the company’s internal investigation is likely to hurt recruitment even more.

One of the latest departures is that of the father-son duo Brad and Jeff Frederickson, who oversaw around $400 million at Wells Fargo Advisors and produced $3.2 million annually, ThinkAdvisor writes. The pair have joined the San Jose, Calif., office of UBS on Feb. 14, according to the publication. Brad Frederickson had been with Wells Fargo and its predecessor firms since 1993, ThinkAdvisor writes.

In addition, Wells Fargo lost Kevin Sanger, who had been with the firm since 2001, according to the publication. Sanger and his partners have launched Portland, Ore.-based JGP Wealth Management as a RIA working with Fidelity Clearing & Custody Solutions, ThinkAdvisor writes.

By Alex Padalka
  • To read the https://www.reuters.com/article/us-wells-fargo-wealth-investigation/massachusettss-securities-regulator-investigates-wells-fargo-advisors-idUSKCN1GK2VM article cited in this story, click here.