Institutional Clients Question Wells About Scandal—Report
While brokers at Wells Fargo Advisors have been fielding calls from retail clients concerned about implications of the cross-marketing sales scandals at the bank and Wells’ overall sales culture, institutional clients with massive accounts are beginning to exert pressure, reports industry publication FundFire.
At an annual presentation that a Wells Fargo fixed income manager made last week to the Los Angeles Water and Power Employees’ retirement plan, the pension plan’s board president asked how the $185 million settlement made with federal regulators and the City and County of Los Angeles would affect plan members with Wells accounts and about corporate governance in general, according to Fundfire.
“We asked them about the settlement,” the chief investment officer of the pension fund, Jeremy Wolfson, told Fundfire.
Wells manages $936 million for the $12.8 billion plan.
The pension fund is not taking immediate action since it is not directly affected but is “monitoring” developments, he told the publication.
On Tuesday, Wells Fargo Chief Executive was skewered by Republicans and Democrats on the Senate Banking Committee for failing to take responsibility for a culture that led bank employees to create as many as 2 million bogus bank and credit card accounts for clients.
More institutional investors are likely to ask questions of Wells consultants, Marcia Selz of Marketing Matrix told Fundfire.
Some wealth management advisors with smaller institutional clients at foundations, endowments and city governments told k-tcc they, too, expect to have some uncomfortable conversations in coming weeks.
Wells Fargo brokers and sales associates have been given talking points emphasizing that the issues are centered on the retail consumer bank, but some competitors said that the scandal has been a tipping point in helping them recruit embittered brokers. A manager at a regional firm said the settlement pushed one broker who had been on the fence to accept an offer to jump within 24 hours of the settlement announcement.
Wells’s best hope may be to find cover from a broad examination of sales pressure throughout the U.S. retail banking industry, Selz told FundFire.
Regulators from the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency told senators Tuesday that they are to determine how widespread the egregious sales practices found at Wells may be.
Wells Fargo’s stock price has dropped more than 8% since the settlement was announced on September 8.
A spokeswoman for Wells Fargo Advisors did not respond to a call for comment.