WSJ: DOL Probing 401(k) Rollover Practices at Wells Fargo

By ASPPA Net Staff • April 27, 2018 • 0 Comments
The Wall Street Journal reports that the Labor Department is examining whether Wells Fargo has been pushing participants to move money from their 401(k)s into more expensive IRAs at the bank.

The report (subscription required), which attributes the story to “a person familiar with the inquiry,” says that DOL 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 article says that Wells Fargo managers have pressed employees in the bank’s retirement division to recommend that clients open more expensive IRAs when they retire or leave their jobs, citing “another person familiar with the bank’s operation.”

Of course, it’s one thing to press active participants to move their balances via an in-service withdrawal, and perhaps something else altogether when a participant who is leaving the plan of their own accord is presented with the option to roll that balance into an IRA. That said, the report says that Wells Fargo employees are given asset retention goals intended to keep these retirement accounts in-house, and that Wells Fargo workers often generated higher fees for the bank by putting clients into mutual fund shares that carried a front-end load.

Earlier this year, Massachusetts’ Secretary of the Commonwealth William F. Galvin opened an investigation regarding Wells Fargo Advisors, seeking information “related to inappropriate referrals of brokerage customers to managed and advisory accounts, unsuitable recommendations of alternative investments, as well as unsuitable referrals and recommendations in connection with 401(k) rollovers.”

In a statement to the Journal, Wells Fargo said the company is “committed to thorough reviews of Wealth and Investment Management,” adding: “We are making significant progress in our work to identify and fix any issues, make things right, and build a better, stronger company.”

In its annual financial report filed last month, Wells Fargo said its board was 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.”