Wells Fargo to pony up $79 million in deferred compensation settlement with advisers

Wells Fargo to pony up $79 million in deferred compensation settlement with advisers
Class action complaint alleges broker had been cheated out of deferred compensation
FEB 04, 2020

Wells Fargo & Co. and two of its brokerage units have agreed to a preliminary settlement to pay $79 million to bring to a close a class-action lawsuit in which an adviser had alleged he had been cheated out of $200,000 in deferred compensation.

The lead plaintiff in the claim, Robert Berry, worked at Wells Fargo Advisors and predecessor firms from 1994 to 2014, according to his BrokerCheck report. He then became registered with LPL Financial and opened his own wealth management firm, Lexington, S.C.-based Berry Financial Group.

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

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.

"While Wells Fargo has consistently denied the allegations in this class action lawsuit involving former financial advisers, we also believe that resolving this matter is in the best interest of the company," wrote spokesperson Shea Leordeanu, in an email.

The proposed settlement affects former advisers, not those currently working under the various Wells Fargo business channels. The main change for advisers in the deferred-compensation plan is that any deferred pay or awards are held in a modified plan. Otherwise, there are no significant changes in the plan.

Mr. Berry’s amended complaint, filed May 1, 2017, took aim at a “forfeiture clause” in two deferred-compensation plans. It alleged that the plans constitute pension benefits under the Employee Retirement Income Security Act, and as such, unvested deferred compensation is not forfeitable. He claimed the lawsuit violated ERISA vesting rules.

He filed an amended complaint in October 2018 and his attorneys argued that the Wells Fargo Advisors’ plans violated ERISA’s funding, vesting and non-forfeitability rules, along with others.

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.”

The court must approve the settlement terms for it to be final.

Latest News

Osaic hit with class action over cash sweep payments
Osaic hit with class action over cash sweep payments

The hybrid RIA is the latest firm to face allegations that it enriched itself at customers' expense by paying unfairly low interest rates in its cash sweep programs.

LPL's Rich Steinmeier turns the page on CEO firing with eye on firm's growth
LPL's Rich Steinmeier turns the page on CEO firing with eye on firm's growth

Installed after Dan Arnold's abrupt termination, the new leader at LPL Financial is highlighting the firm's refocusing on the individual advisor.

LPL, Raymond James boost advisor ranks anew
LPL, Raymond James boost advisor ranks anew

LPL Financial welcomes a $345 million investment and planning team from Ameriprise as RayJay's employee advisor arm adds a seasoned Well Fargo breakaway.

CFP Board CEO Keller retiring
CFP Board CEO Keller retiring

The CFP Board will be searching for a replacement for CEO Kevin Keller who will be stepping down in April 2026.

$3000 gold record in sight on Trump 2.0 fears, says Citi
$3000 gold record in sight on Trump 2.0 fears, says Citi

Citi analysts project a historic high in three months as tariff and trade war threats fuel a rush for the haven metal.

SPONSORED Taylor Matthews on what's behind Farther's rapid growth

From 'no clients' to reshaping wealth management, Farther blends tech and trust to deliver family-office experience at scale.

SPONSORED Why wealth advisors should care about the future of federal tax policy

Blue Vault features expert strategies to harness for maximum client advantage.