Wells Fargo’s Wealth Boss Rebuts Report on Advisor Sales Bias
(Updated with comment from Bloomberg News in the last paragraph.)
Jon Weiss, the head of Wells Fargo & Co.’s Wealth and Investment Management division, quickly defended the company’s approach to compensating brokers on Thursday, responding to a news report that suggested his wealth unit imposed on employees the same high-pressure sales quota-and-incentive culture that led to the fake-account scandals at Wells’ consumer bank.
“The article omitted important information and gave the incorrect impression that compensation practices in Wealth and Investment Management led to charging clients for unwanted accounts or services,” Weiss wrote in a division-wide response to a Bloomberg News article that Wells also posted on a public website. “We have in place long-established processes and practices to help ensure that account openings are authorized in writing by the client.”
The Bloomberg story made particular mention of the Envision financial plans that Wells’ more than 14,500 brokers are encouraged to to create for prospects and clients. It said some brokers and managers gamed the Envision software by plugging numbers into the plans, out of the presence of clients, to justify sales or holdings of certain investments.
Several current and former brokers at Wells Advisors have told AdvisorHub that though clients do not pay for Envision plans, which creates risk-based investment models, managers pressured them to produce them because they are strong sales tools. Wells for a time offered brokers a so-called “4Front” bonus that included Envision plan quotas, they said, and the plans could be juiced up by projecting interest from annuities and other products to meet internal metrics for the plans’ validity.
Wells spokeswoman Shea Leordeanu told AdvisorHub that the Envision program “does not result in any product sales” and is simply a planning process that creates a recommended risk model.
“When we notice plans are not being updated or that they are not as robust as recommended, we work with management teams to re-emphasize the value of collaborative financial planning to ensure clients have the right experience,” she wrote in an e-mail. “ If anyone were to create consistently low-quality plans, we take action.”
Wells’ 2016 compensation plan offered enhanced pay to brokers who steered clients to fee-based accounts, loans and estate plans, according to the Bloomberg story. Wells Fargo Advisors rescinded bonuses and grid enhancements linked to sales of mortgages, credit lines and other banking products in its 2017 compensation plan and has not reinstated them in this year’s comp plan.
In his ‘open letter’ to the brokers, private bankers and trust and retirement specialists in his division, Weiss said the Bloomberg article “gave the incorrect impression that compensation practices in Wealth and Investment Management led to charging clients for unwanted accounts or services.”
He was clearly distinguishing his division from Wells Fargo’s acknowledgement in September 2016 that bank employees in their zeal to meet quotas and cross-selling pressures created 3.5 million checking accounts, as well as credit card accounts, without customers’ knowledge. The scandal has led to a $185 million settlement with federal and California entities, continuing regulatory investigations, clawbacks of millions of dollars of bonuses from top executives and the firing of some 5,300 employees.
Wells last month disclosed that government bodies have opened investigations of its wealth management activities, specifying that it is being questioned about 401(k) rollovers, recommendations of certain alternative investments and referrals to other business lines.
“[O]ur financial advisors are not given incentives or compensated for simply opening accounts,” Weiss wrote in his rejoinder to the Bloomberg article. “Our compensation plans are designed to recognize client-focused behavior, and any assertion to the contrary is simply incorrect.”
A Bloomberg spokeswoman said the organization stands by its reporting.