Two brokers who left Wells Fargo Advisors at the start of the month have sued the firm, along with Wells Fargo Bank, alleging that the steady stream of scandals over the past two years at the bank and brokerage substantially damaged their business.
Wells Fargo has been enmeshed in scandals since September 2016, when it was revealed that Wells Fargo bank employees had secretly created millions of accounts in the names of customers without their consent. The bank was fined $185 million.
Wells Fargo clients and the public have lost trust in the company and made it impossible for advisers, including the two who filed the complaint, "to keep existing customers, bring in new customers, and secure customer referrals from influential members of the public, crucial" to building the advisers' business, the complaint alleges.
The two advisers, John L. Perry and Robin Johnson, left Wells Fargo Advisors on Oct. 1 and are now working at RBC Capital Markets. The two are part of a team and had both worked at Morgan Stanley from 2009 to 2015 before moving to Wells Fargo.
Mr. Perry produced close to $1 million in fees and commissions annually while at Morgan Stanley, but his business "nosedived" by about 50% when working at Wells Fargo, even though this was during a bull market when his production should have been "skyrocketing," according to the complaint.
The two advisers filed their arbitration claim on Oct. 8 with the dispute resolution arm of the Financial Industry Regulatory Authority Inc. Also named as a claimant is the estate of Ronald Perry, John L. Perry's father and business partner, who passed away after joining Wells Fargo Advisors.
"Wells Fargo's reputation is toxic right now, and that has made it extraordinarily difficult for financial advisers at the firm to meet production goals, pay off promissory notes and do what they were hired to do: bring in clients and create revenue," said Andrew Stoltmann, a longtime plaintiff's attorney who, for the first time, is representing advisers in a Finra arbitration claim.
"I'm representing 30 people right now but have heard from more than 100 current or ex-Wells Fargo advisers," Mr. Stoltmann said. "These brokers are upset, angry and financially harmed. For advisers who can establish they have lost business, I believe these cases are golden."
A Wells Fargo Advisors spokesperson, Shea Leordeanu, did not comment.
While some Wells Fargo executives and advisers have sought to minimize the effect the bank's scandals have had on their adviser workforce, a recent close examination by InvestmentNews documented a massive outflow of hundreds of brokers and billions of dollars in client assets over the past two years.
Wells Fargo's competitors claim they continue to receive a steady flow of inquiries about employment from the firm's advisers, who complain that clients are fleeing and client referrals are drying up because of the damage to the firm's brand.
Since September 2016, the head count at Wells Fargo Advisors has declined by more than 1,000, to 14,074 currently. The company has said that some of those departing advisers were retiring.
Prior to moving to Wells Fargo Advisors, Mr. Perry and his team would see six to 12 referrals from other clients, accountants or attorneys each year, which translated into up to half a dozen new clients with between $5 million and $20 million — or more — in new assets, according to the complaint.
In the past two years at Wells Fargo, Mr. Perry and his team received "only a few referrals, which amounted to two new clients, one of whom was already a Wells Fargo customer who simply sought a new adviser," the complaint alleges.