Wells Fargo Being Examined To Determine if the Bank Pushed 401(k) Retirement Plan Participants into More Expensive IRAs
On April 26, 2018, The Wall Street Journal reported that the U.S. Department of Labor
. . . is examining whether Wells Fargo & Co. has been pushing participants in low-cost corporate 401(k) plans to roll their holdings into more expensive individual retirement accounts at the bank, according to a person familiar with the inquiry.
Labor Department investigators also are interested in whether Wells Fargo’s retirement-plan services unit pressed account holders to buy in-house funds, generating more revenue to the bank, the person said.
Wells Fargo’s Handling of Client Retirement Savings at Issue
The Wall Street Journal reported:
At issue in the Labor Department’s investigation is how Wells Fargo handles its clients’ retirement savings. Under the Employee Retirement Income Security Act, entities that serve these accounts are supposed to put their clients’ interests ahead of their own.
Wells Fargo managers have pressed employees in the bank’s retirement division to recommend that clients open more expensive individual retirement accounts when they retire or leave their jobs, according to another person familiar with the bank’s operation.
The bank gives employees asset retention goals intended to keep these retirement accounts in-house, this person said, adding that Wells Fargo workers often generated higher fees for the bank by putting clients into mutual-fund shares that carried a front-end “load,” or fee.
Wells Fargo Reviewing Certain Activities to Determine If There Have Been Inappropriate Referrals or Recommendations
Wells Fargo, according to The Wall Street Journal:
. . . said its board is reviewing certain activities to assess “whether there have been inappropriate referrals or recommendations, including with respect to rollovers for 401(k) plan participants, certain alternative investments, or referrals of brokerage customers to the company’s investment and fiduciary services business”; the review is at a preliminary stage.
The Justice Department and the Securities and Exchange Commission also are examining the bank’s retirement plan practices alongside a broader sales practices probe, people familiar with the matter said.
A whistleblower has come forward to speak with regulators about Wells Fargo’s IRA rollover activities, according to the person familiar with the inquiry, alleging that the bank breached its fiduciary duties to clients.
Review of Certain Wealth and Investment Management Activities in Response to Inquiries from Federal Government Agencies
CNBC.com reported that in Wells Fargo’s latest quarterly filing, the bank “. . . disclosed a review of certain activities in the wealth and investment management business in response to inquiries from federal government agencies. The review included whether the division had made inappropriate referrals and recommendations for 401(k) participants.”
Review of Certain Activities Within Wealth and Investment Management A review of certain activities within Wealth and Investment Management (WIM) being conducted by the Board, in response to inquiries from federal government agencies, is assessing whether there have been inappropriate referrals or recommendations, including with respect to rollovers for 401(k) plan participants, certain alternative investments, or referrals of brokerage customers to the Company’s investment and fiduciary services business. The review is in its preliminary stages.
For additional information, please see CNN Money’s “US government urged Wells Fargo to probe its 401(k) tactics.”