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.
