Wells Fargo Finds Itself In DOL Crosshairs

Wells Fargo is the target of a Department of Labor probe on whether the bank has been pushing its customers to take their money out of low-cost corporate 401(k) plans and roll their holdings into more expensive individual retirement accounts at the bank, The Wall Street Journal reported today.

The DOL also is questioning whether Wells Fargo’s retirement-plan services unit pressed account holders to buy in-house funds, generating more revenue to the bank.

This marks the latest in a string of bad news for Wells Fargo, which has been dealing with a  number of regulatory issues over the past two years.  Last week, it agreed to pay a $1 billion fine over claims of misconduct in its auto and mortgage lending businesses.

At the core of DOL's investigation is the way Wells Fargo handles its clients’ retirement savings. Under the Employee Retirement Income Security Act, entities that serve these accounts are supposed to put their clients’ interests ahead of their own.

Wells Fargo managers pressed employees in the bank’s retirement division to recommend that clients open more expensive individual retirement accounts when they retire or leave their jobs,  the Journal reported.

The bank gives employees goals intended to keep these retirement accounts in-house, the Journal reported, adding that Wells Fargo workers often generated higher fees for the bank by putting clients into mutual fund shares that carried a front-end “load,” or fee.

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Follow her on Twitter @INNsusan. Contact her at [email protected].

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