Wells Fargo Advisors to fire back against former brokers suing it

Firm intends to file counterclaim against two brokers who alleged they lost business in the wake of bank scandals

Oct 19, 2018 @ 12:59 pm

By Bruce Kelly

Wells Fargo Advisors plans to fight back against two ex-brokers who sued the firm this month, claiming they lost business in the wake of the bank's scandals, by filing a counterclaim against them in industry arbitration.

The advisers, John L. Perry and Robin Johnson, left Wells Fargo Advisors on Oct. 1 and are now working at RBC Capital Markets. On Oct. 8, they filed their arbitration claim, alleging that the steady stream of scandals over the past two years at the bank and brokerage substantially damaged their business, with the dispute resolution arm of the Financial Industry Regulatory Authority Inc.

But a Wells Fargo Advisors spokesperson, Shea Leordeanu, said the issue at hand was that the advisers failed to pay back a promissory note, which are paid as bonuses to brokers to move to one firm from another. The broker then pays back the loan by working at the firm over several years.

"If an adviser leaves the company before fully repaying a promissory note, we use the Finra dispute resolution process to collect," Ms. Leordeanu wrote in an email. "This claim is an attempt to avoid repaying their obligations. We still intend to collect."

The attorney for the advisers, Andrew Stoltmann, said that was not the issue.

"This is not an attempt to duck payment on a note," Mr. Stoltmann said. "This is a classic case of blaming the victim."

Mr. Stoltmann's firm, Stoltmann Law, has advertised online looking for Wells Fargo advisers who want to sue the firm in Finra arbitration.

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 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% while he worked at Wells Fargo, even though this was during a bull market when his production should have been "skyrocketing," according to the complaint.

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.


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