A former Wells Fargo Advisors financial advisor, who worked at the firm for 15 years before jumping to a much smaller rival in 2022, is on the hook for $512,000 to his old firm after losing an industry dispute over a partially unpaid promissory note.
The advisor, Robert Warnock, was a bank branch advisor for Wells Fargo and left to join Arkadios Capital, an independent broker-dealer and registered investment advisor. Wells Fargo sued Warnock in 2023, using FINRA Dispute Resolutions as it forum, alleging he was in breach of his promissory note, which was to be paid back over 10 years starting in 2016.
The original loan amount was $833,000, according to the FINRA arbitration award, which was made public on Friday. He left with four years left on the note.
One of the keys to the dispute between Warnock and Wells Fargo appears to be an effort by the advisor to move from working as a bank advisor to its independent contractor division, known as FiNet.
Advisors typically are paid much higher percentages of the revenue they produce as independent brokers at firms like FiNet when compared to working at a bank, thus making such a change attractive for an advisor.
Warnock testified in the arbitration proceeding he was “disgruntled” with Wells Fargo after 2016 for a number of reasons.
“One reason was that he had been a ‘bank’ based financial advisor and planner, in that he had an office in Wells Fargo bank lobbies and received many customers from bank traffic,” according to the arbitration award. “Bank traffic declined and he wished to be re-classified by [Wells Fargo] to a different broker designation, with more scope in finding and developing his business.”
2016 was a particularly difficult year at Wells Fargo, due to the numerous credit card and bank scandals that engulfed the firm.
Wells Fargo did not make such a change after many requests, according to the award, and Warnock “testified that he never would have left [Wells Fargo] had he been transferred to FiNet. For this and several other reasons, he began searching for other opportunities outside of Wells Fargo.”
Warnock, who is based in Atlanta, did not return a call Tuesday morning to comment. A Wells Fargo spokesperson wrote in an email: “We are pleased with the outcome."
According to the award, Warnock owes Wells Fargo $469,000 for the promissory note, which includes interest, and $43,000 for the firm’s legal fees.
Wells Fargo Advisors has been criticized and questioned in the past over its policies allowing only some selected advisors to move easily to its FiNet business from its other business models.
Industry observers were quick to note the futility of advisors who try to wriggle out of obligations to pay back promissory notes and loans.
“The fact of the matter is, with Wells Fargo or any firm, when an advisor gets a front-end bonus loan, it’s a contract and you have to pay that money back,” said Louis Tambaro, an industry attorney.
“There’s no obligation for a firm to allow an advisor to move from one affiliate to another,” said Sander Ressler, managing director of Essential Edge Compliance Outsourcing Services. “It’s discretionary and based on facts of that individual advisor.”
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