Some advisers would run the Envision simulations without their clients present by plugging in numbers they knew would recommend investments that clients already held, one former adviser said. At least one manager actively encouraged that behavior, another person said, on the belief that owning more Wells Fargo products would make client assets “sticky” and unlikely to leave the bank.
The bank says its use of the Envision software didn’t disadvantage clients. “If anyone were to create consistently low-quality plans, we take action,” Leordeanu said.
Industry Practices
Many of the practices described by current and former Wells Fargo employees are similar to those that have drawn regulatory scrutiny at other banks.
In-house investments and managed accounts were at the core of JPMorgan Chase & Co.’s agreement three years ago to pay a $367 million asset-management settlement to the SEC and the Commodity Futures Trading Commission over allegations that it failed to properly inform clients that it was selecting investments based on their profitability to the bank. Some of those investments involved hedge funds, a type of alternative asset, which paid the bank to recommend them to asset management clients.
JPMorgan acknowledged failing to inform customers of the conflicts and agreed to changes. JPMorgan’s lapses were brought to light with the help of whistle-blowers who provided details of its internal practices to regulators.