Ex-Wells Fargo broker complaint wins class action status in fight over deferred compensation

Broker alleges he was cheated out of $200,000 in compensation protected by ERISA

Oct 16, 2018 @ 3:08 pm

By Bruce Kelly

A federal judge has granted class action status to a lawsuit brought by a financial adviser who claimed Wells Fargo Advisors cheated him out of $200,000 in deferred compensation.

The adviser, Robert Berry, worked at Wells Fargo Advisors and predecessor firms from 1994 to 2014, according to his BrokerCheck report. He was "permitted to resign," according to BrokerCheck.

At that time, he chose to open his own wealth management firm, Berry Financial Group, according to the firm's website, and is affiliated with LPL Financial.

Brokers, like Mr. Berry, at large institutions can accrue hundreds of thousands of dollars — if not millions — in deferred compensation, making restrictions on when and how a broker can get his hands on the money a highly contentious issue for some advisers. In the past, such plans used to be voluntary at large wirehouses.

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.

Mr. Berry's amended complaint, filed May 1, 2017, took aim at a "forfeiture clause" in two deferred compensation plans. It alleges that the plans constitute pension benefits under the Employee Retirement Income Security Act, and as such, unvested deferred compensation is not forfeitable.

The complaint claims the two deferred compensation plans in question are not so-called "top hat" plans, which would have made them available only for a select group of management and other highly compensated employees and made them exempt from ERISA.

In the amended complaint, Mr. Berry, 65, argued that the Wells Fargo Advisors' plans violated ERISA's funding, vesting, and non-forfeitability rules, along with others.

"A forfeiture clause in the plans allows Wells Fargo to forfeit a participant's purportedly unvested deferred compensation" if the broker moves to a rival in a period of three years, according to the complaint.

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."

"But because the forfeiture clause is unenforceable under ERISA, [Mr. Berry] and all others similarly situated are entitled to their forfeited deferred compensation," the complaint alleges.

"The company denies the claims in the lawsuit and will defend its position on the merits," wrote a spokesperson for Wells Fargo Advisors, Shea Leordeanu.

Mr. Berry, who was named the lead plaintiff in the matter, declined to comment.

(Full disclosure: One of the attorneys representing Mr. Berry, Tom Ajamie, co-wrote a book with me about the 2008 financial crisis).

Wells Fargo & Co., the parent bank of Wells Fargo Advisors, and Wells Fargo Advisors Financial Network, the independent broker-dealer, are also named in the complaint.

Law360 first reported the class action certification of Mr. Berry's complaint about the Wells Fargo Advisors deferred compensation plan last week.

0
Comments

What do you think?

View comments

Recommended for you

Does your pay stack up?

The Adviser Research Dashboard

Based on data collected through InvestmentNews' annual adviser research studies, this interactive, customizable tool allows you to view detailed data on compensation, staffing and financial performance practices from across the industry.

Learn more »

Featured video

INTV

How InvestmentNews picks its Women to Watch winners

The process is laborious and exacting, but well worth it. The end result each year is an impressive group of women in the advice industry from whom others can draw inspiration.

Latest news & opinion

Some good news about female recruitment in financial advice

Each of four core advisory positions tracked in InvestmentNews' benchmarking study has seen an uptick in women entrants.

10 ETFs that are up more than 35% this year

Amid the stock market carnage, there are still some funds posting big gains.

10 biggest HSA providers rated

Morningstar rated the largest plan providers as investment and spending vehicles.

Morningstar: DOL fiduciary rule reduces inflows to mutual funds with high loads

With the measure's demise, will the SEC's advice reform sustain the momentum?

6 tax strategies for year-end planning

How to help clients maximize their wealth using specific tax strategies before the end of the year.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print