For almost two years, Wells Fargo (WFC) has been under near-constant fire. It all began, of course, with the revelation that employees in bank branches, who faced immense pressure to sell, had opened fake accounts for customers. Then, the bank agreed to pay a $1 billion fine to settle allegations of abuses in its auto lending and mortgage businesses.
In the spring, the bank also disclosed that its board was conducting a review of “certain activities” within the bank’s wealth management unit, which filings describe as including fee calculations of fiduciary accounts.
In mid-July, Yahoo Finance reported on increasing sales pressure in the wealth management sector of Wells’s Private Bank. Late last month, the Wall Street Journal also reported that four Wells Fargo advisors had sent a letter to the Justice Department and the Securities and Exchange Commission, detailing “long-standing problems” in the wealth management business.
Now, former advisors in the wealth management area of the Private Bank, which caters to high-net-worth investors, are shedding light on what some of those problems may be. They expressed additional concerns to Yahoo Finance, including Wells encouraging fiduciary advisors to put client money in higher-fee options, requiring advisors to, in effect, cross-sell products like mortgages and financial planning, and push what several former advisors viewed as unnecessary financial planning fees on clients. Internal documents shared with Yahoo Finance corroborate their concerns.
In addition, the Journal reported that the broad class of Wells Fargo advisors were encouraged to funnel wealthier clients into the Private Bank’s wealth management area because the fees were higher. A former senior executive in this area and multiple former Wells Fargo brokers expressed that to Yahoo Finance as well.
In general, Wells Fargo’s interest in boosting its advisory revenue is in step with much of the industry. In the low-interest environment of the past decade, most banks have looked for other ways to bring in revenue, and wealth management products were an obvious choice for expansion. But at Wells Fargo, a number of troubling reports have emerged that cast a less-than-flattering light on this expansion.