Federal authorities are looking into Wells Fargo’s wealth and investment management business, the bank disclosed Thursday, the latest sales practices problem to emerge at the beleaguered company.
The bank’s board is reviewing activities within the business unit in response to inquiries from federal government agencies, Wells said in its annual 10-K filing.
Specifically, the board is assessing whether there have been inappropriate referrals or customer recommendations, including involving rollovers for 401(k) plans and alternative investments. The review, in its preliminary stages, is also focusing on referrals of brokerage customers to Wells Fargo’s investment and fiduciary services business.
The problems echo similar ones the Observer reported on in October 2016 involving Wells’ national retail brokerage business, which is part of its wealth management arm. Customers and former employees of the brokerage arm, Wells Fargo Advisors, said questionable sales practices affected that operation, which sells everything from mutual funds to annuities to IRAs.
Consumer advocates on Thursday were critical of the latest revelations involving the third-largest U.S. bank by assets.
“Senior management must be replaced and the bank should be broken up,” said Bartlett Naylor, of Washington-based consumer advocacy group Public Citizen.
Lisa Donner, executive director of Americans for Financial Reform, used Thursday’s disclosures to argue against Trump administration efforts to roll back financial regulations: “Mounting evidence of just how pervasively and systematically Wells Fargo has abused consumers is a powerful argument for more robust regulation and enforcement to hold big banks accountable.”
On the bank’s website, CEO Tim Sloan said Wells is working to fix its problems and is committed to remaining transparent about its efforts.
Also Thursday, Wells Fargo said it has found instances of incorrect fees being applied to assets and accounts in its investment and fiduciary services business, which is part of its wealth management operation. Those problems have resulted in overcharges, the bank said, adding that a review is in preliminary stages.
The fresh disclosures come as Wells continues to recover from the scandal over unauthorized accounts that erupted in September 2016. Employees opened accounts and enrolled customers in online banking without their knowledge in a push to meet aggressive sales goals.
In 2016, Wells Fargo placed the head of the brokerage business, Mary Mack, over the community banking unit to help that operation recover from the scandal.
Mack, who was based in St. Louis, relocated to Charlotte and reports directly to Sloan, who replaced John Stumpf after he abruptly retired over the scandal.
Last year, Wells put New York-based Jonathan Weiss, head of Wells Fargo Securities, in charge of the wealth and investment management business. Weiss replaced David Carroll, who was based in Charlotte and retired after a roughly 38-year career with Wells and Charlotte predecessor companies Wachovia and First Union.
In a Thursday note to employees reviewed by the Observer, Weiss noted the 10-K revelations will be discouraging to workers and their clients.
“At this point, we don’t have many facts which is why we are limited in what we are able to share,” he said. “In times of challenge, people demonstrate their true leadership. Now is one of those times for Wealth and Investment Management. We will get to the bottom of these issues and resolve them.”
In Thursday’s filing, Wells also said it plans to increase amounts to reimburse customers harmed by auto insurance purchased through a third-party vendor on their behalf. Last year, Wells admitted hundreds of thousands of customers may have been charged premiums for insurance they did not need.
The company now expects to pay $145 million in cash remediation and $37 million in account adjustments.
Wells Fargo also disclosed Thursday that it is reviewing practices in its foreign exchange business and responding to inquiries from government agencies about the unit. Reports in October said that Wells had fired four bankers in its foreign-exchange business amid an investigation by the bank and regulators.
Wells is based in San Francisco, but it has its largest employee hub in Charlotte.