Wells Fargo Wealth Unit Steered Clients to Pricey Products, Inside Sources Say
Wells Fargo’s wealth management business regularly steered clients into products that benefited its employees and the bank and weren’t necessarily in the best interest of the clients, Bloomberg reports.
The company’s retail banking unit has been in trouble with regulators after revelations the bank’s employees — spurred on by aggressive sales quotas — opened millions of bogus credit and debit accounts, for which Well Fargo settled for $185 million in September 2016. Yet as recently as that year, Wells Fargo also set high quotas and offered extra pay to financial advisors who could get clients to take out loans or open accounts with recurring fees, several sources tell Bloomberg, among whom are one current and five former Wells Fargo advisors. Two of the sources tell the news service that to hit their targets, some advisors used financial planning software in such a way that it would recommend investment portfolios already owned by the clients.
Advisors were also encouraged to put clients into fee-based accounts, according to a 2015 pay grid reviewed by Bloomberg. Advisors who had at least 60% of client assets in such accounts or produced at least 80% of revenue from such accounts, rather than commission-based ones, received credits, according to the news service.
Wells Fargo admits to Bloomberg that its wealth management unit indeed resorted to such incentives until 2017 but insists that they didn’t harm clients. A spokeswoman for the company tells the news service Wells Fargo revamped the wealth unit’s pay structure to remove rewards for promoting certain products.
Wells Fargo’s wealth unit, despite trouble at the company’s retail bank, was largely able to avoid regulatory scrutiny until this year. Following a late 2017 directive from the Justice Department, the company’s board of directors began investigating sales practices in the wealth unit.
And in mid-March, the Wall Street Journal reported the unit was also being directly investigated by the Justice Department and the SEC.