A week ago I cautioned people on two fronts in writing about Top Ten Investor Threats and How Much Are You Really Paying for That Fund?
In serendipitous fashion, over the weekend I read about a former financial advisor at Wells Fargo (WFC) who blew the whistle on his firm for not properly informing clients of investment fees embedded in one of its programs. Which one? The Wells Fargo (WFC) Advisors Envision plans. Let’s navigate and see exactly what this whistleblower, George Hartzman, has to say as he writes,>>>>>>>
I believe Wells Fargo executive management defrauded the government by creating an illegal path to retain advisors after receiving government bailouts, by mandating a fraudulent path for advisors to acquire retention bonuses. I believe Wells Fargo’s executive management created a backdoor retention program that led thousands of brokers to violate fiduciary duties to the firm’s clients, by incentivizing the omission of investment fees in Envision plans subsequently reported on client statements.
Defrauded the government? No surprise there. With hundreds of billions of dollars thrown around like Monopoly money, the waste, fraud, and corruption was probably rampant.
How about defrauding investors, though? Hartzman expounds further,
Many Wells Fargo Envision Plans created to earn 4front bonuses did not include investment fees. On September 7, 2012, in front of 25 to 40 financial advisors at the Hyatt Regency St. Louis at The Arch, Greg Shiveley, Envision Sales Manager at Wells Fargo Advisors, said “There are 441,942 households with Envision Plans of Record.” and “The overwhelming majority of Envision Plans do not include investment costs.”
I violated my fiduciary responsibilities to clients with advisory accounts by not including investment fees in their Envision plans, along with thousands of other Wells Fargo Financial Advisors. Wachovia Securities executives who visited the Greensboro’s 3623 North Elm Street Branch told a meeting of brokers that the retention program tied to Envision investment plans was set up to avoid critical press reports about TARP being money used to “retain” financial advisers. We were told “do the plans and get paid.”
Envision plans can be manipulated to sell clients and prospects on new investment ideas, staying on a current course with a financial adviser, and with the “retention” plan, game compensation in violation of Investment Advisers Act of 1940.
Do not include investment costs? Think the folks at the SEC and FINRA might care to investigate? Hartzman asserts,
Thinking I could mitigate personal risk by contacting regulatory authorities, I filed with the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) DC Office of the Whistleblower which went nowhere. I then filed with the NC Secretary of State Securities Division, who investigated and referred files to Atlanta’s SEC and FINRA offices. The financial plan/bonus matter went back to FINRA’s DC Office of the Whistleblower from Atlanta and on to Kansas City’s FINRA regional office, where Wells Fargo Advisors home office is located. And then nothing.
American regulatory authorities will not say whether a case exists or if a case is opened or closed, even though I contacted the government during and after interactions with Wells Fargo management, leaving myself and loved ones at risk of reprisal.
As for Hartzman?
My employment at Wells Fargo Advisors was terminated on Monday, October 8, 2012 in direct retaliation for disseminating whistleblower information that our regulatory infrastructure seems unwilling to act upon and our mass media won’t report.
Interestingly, an individual who commented on Hartzman’s commentary had this to offer:
Same set up circumstances. Different company.
External # to Ethicspoint: ditto
Internal Investigation: ditto
Took issue to manager: ditto
HR Investigation: ditto
No merit to my claim: ditto
Dept of Labor WB Claim: ditto
TX State Sec Board- ditto
Remember what Jack Welch had to say about whistleblowers?
In fact, the only way to deal with a whistleblower’s accusations – again, every single time and often against your own instincts – is with a hyper-bias toward believing that the informant is onto something big. Such a bias must impel you to investigate every claim ferociously.
Navigate accordingly…and make sure you get a written review of ALL costs, fees, expenses, loads, charges, and whatever else the banks/brokers/planners define as “what you pay.”
If you are a Wells Fargo client and involved with its Envision program, you may want to place a call to your broker or planner. Please let us know what you learn.
Isn’t it time or overtime to subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook.
I have no business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.