Wells Fargo & Co. and two of its brokerage units have agreed to a preliminary settlement to pay $79 million to bring to a close a class-action lawsuit in which an adviser had alleged he had been cheated out of $200,000 in deferred compensation.
The lead plaintiff in the claim, Robert Berry, worked at Wells Fargo Advisors and predecessor firms from 1994 to 2014, according to his BrokerCheck report. He then became registered with LPL Financial and opened his own wealth management firm, Lexington, S.C.-based Berry Financial Group.
Brokers, like Mr. Berry, can accrue hundreds of thousands of dollars — if not millions — in deferred compensation at large institutions, making restrictions on when and how a broker can get his hands on the money, a highly contentious issue for some advisers.
But in some institutions, deferred compensation plans are now mandatory for brokers and advisers. Critics of the wirehouses claim that part of advisers’ pay is being held captive.
"While Wells Fargo has consistently denied the allegations in this class action lawsuit involving former financial advisers, we also believe that resolving this matter is in the best interest of the company," wrote spokesperson Shea Leordeanu, in an email.
The proposed settlement affects former advisers, not those currently working under the various Wells Fargo business channels. The main change for advisers in the deferred-compensation plan is that any deferred pay or awards are held in a modified plan. Otherwise, there are no significant changes in the plan.
Mr. Berry’s amended complaint, filed May 1, 2017, took aim at a “forfeiture clause” in two deferred-compensation plans. It alleged that the plans constitute pension benefits under the Employee Retirement Income Security Act, and as such, unvested deferred compensation is not forfeitable. He claimed the lawsuit violated ERISA vesting rules.
He filed an amended complaint in October 2018 and his attorneys argued that the Wells Fargo Advisors’ plans violated ERISA’s funding, vesting and non-forfeitability rules, along with others.
After Mr. Berry resigned and started his own firm, “Wells Fargo used the forfeiture clause to deny [him] his deferred compensation,” according to the complaint. “Wells Fargo did the same to other departing employees.”
The court must approve the settlement terms for it to be final.
Relationships are key to our business but advisors are often slow to engage in specific activities designed to foster them.
Whichever path you go down, act now while you're still in control.
Pro-bitcoin professionals, however, say the cryptocurrency has ushered in change.
“LPL has evolved significantly over the last decade and still wants to scale up,” says one industry executive.
Survey findings from the Nationwide Retirement Institute offers pearls of planning wisdom from 60- to 65-year-olds, as well as insights into concerns.
Streamline your outreach with Aidentified's AI-driven solutions
This season’s market volatility: Positioning for rate relief, income growth and the AI rebound
