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Wells Fargo to Adjust Policy to Keep Fee-Based Accounts
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Wells Fargo & Company (WFC - Free Report) announced that it will continue offering individual fee-based retirement accounts to clients. However, the company will make some adjustments to its compliance procedure with the U.S. Department of Labor’s (DOL) new fiduciary rule, which is expected to come into effect from April next year.
Per the rule, all financial advisors are required to act as fiduciaries to their clients while giving investment advice, and managing their client’s retirement accounts. The regulation aims to prevent advisors from placing their own interests before their clients’ to earn high commissions and fees from retirement accounts.
Per a memo sent by Wells Fargo, the company is likely to offer such commissions-paying accounts in a way that complies with the rule's "best interest contract exemption." Under this, firms are allowed to offer commissions-paying products, provided they give better disclosure about fees to their clients.
Moreover, in the weeks ahead, the bank will provide more information on the specific adjustments it is expected to incorporate, in order to remain under compliance with the DOL’s fiduciary rule.
After the announcement, Wells Fargo has become the latest firm to adopt the rule. Earlier, banks like JPMorgan Chase & Co. (JPM - Free Report) , Bank of America Corporation (BAC - Free Report) and Morgan Stanley (MS - Free Report) already unveiled their plans to comply with the regulation.
While Morgan Stanley will also offer fee-based retirement accounts under the best interest contract exemption, both BofA and JPMorgan will discontinue providing such accounts to its clients.
Additionally, after the cross-selling scandal, which has been in the news for quite a long time now, Wells Fargo decided to separate its Chairman and CEO roles. The bank announced that its Board of Directors has approved the amendments in the Company’s By-Laws. The amendment, which will be in effect immediately, requires the separation of the Chairman and CEO roles, and also for the Chairman and Vice Chairman to be independent directors.
Also, per a legislation introduced by lawmakers recently, customers at Wells Fargo will be allowed to go to the court to settle their claims about cross selling, instead of engaging in private arbitration.
This comes as a bad news for the company, which had earlier filed a motion in the U.S. District Court in Utah to instruct customers, who have sued the bank for fraud, breach of contract and invasion of privacy, to settle their disputes in private arbitrations rather than in court.
Notably, in the last three months, shares of Wells Fargo gained 7.5%. However, the sales scam along with some other concerns led the company to significantly underperform the Zacks categorized Major Regional Banks industry, which gained 16.5% over the same time period.
Currently, Wells Fargo carries a Zacks Rank #3 (Hold).
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Wells Fargo to Adjust Policy to Keep Fee-Based Accounts
Wells Fargo & Company (WFC - Free Report) announced that it will continue offering individual fee-based retirement accounts to clients. However, the company will make some adjustments to its compliance procedure with the U.S. Department of Labor’s (DOL) new fiduciary rule, which is expected to come into effect from April next year.
Per the rule, all financial advisors are required to act as fiduciaries to their clients while giving investment advice, and managing their client’s retirement accounts. The regulation aims to prevent advisors from placing their own interests before their clients’ to earn high commissions and fees from retirement accounts.
Per a memo sent by Wells Fargo, the company is likely to offer such commissions-paying accounts in a way that complies with the rule's "best interest contract exemption." Under this, firms are allowed to offer commissions-paying products, provided they give better disclosure about fees to their clients.
Moreover, in the weeks ahead, the bank will provide more information on the specific adjustments it is expected to incorporate, in order to remain under compliance with the DOL’s fiduciary rule.
After the announcement, Wells Fargo has become the latest firm to adopt the rule. Earlier, banks like JPMorgan Chase & Co. (JPM - Free Report) , Bank of America Corporation (BAC - Free Report) and Morgan Stanley (MS - Free Report) already unveiled their plans to comply with the regulation.
While Morgan Stanley will also offer fee-based retirement accounts under the best interest contract exemption, both BofA and JPMorgan will discontinue providing such accounts to its clients.
Additionally, after the cross-selling scandal, which has been in the news for quite a long time now, Wells Fargo decided to separate its Chairman and CEO roles. The bank announced that its Board of Directors has approved the amendments in the Company’s By-Laws. The amendment, which will be in effect immediately, requires the separation of the Chairman and CEO roles, and also for the Chairman and Vice Chairman to be independent directors.
Also, per a legislation introduced by lawmakers recently, customers at Wells Fargo will be allowed to go to the court to settle their claims about cross selling, instead of engaging in private arbitration.
This comes as a bad news for the company, which had earlier filed a motion in the U.S. District Court in Utah to instruct customers, who have sued the bank for fraud, breach of contract and invasion of privacy, to settle their disputes in private arbitrations rather than in court.
Notably, in the last three months, shares of Wells Fargo gained 7.5%. However, the sales scam along with some other concerns led the company to significantly underperform the Zacks categorized Major Regional Banks industry, which gained 16.5% over the same time period.
Currently, Wells Fargo carries a Zacks Rank #3 (Hold).
Of the banks mentioned above, Bank of America and Morgan Stanley carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>.