Wells Fargo & Co. is expected to announce a restructuring of its wealth management business, according to people familiar with the matter, as it grapples with government investigations tied to client referrals and other related matters.
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The bank is planning to combine two large divisions within the business, known internally as Wealth Brokerage Services and Private Client Group, the people said. Both are brokerages serving mass affluent customers. The private client group has about 9,500 brokers who work out of Wells Fargo’s brokerage offices, and Wealth Brokerage Services has around 3,400 brokers who work out of retail bank branches.
A Wells Fargo spokeswoman said the bank’s “Wealth and Investment Management group is reimagining our business to become more efficient” but “no final decisions have been made.” She added that the bank will continue to serve wealth management clients across several channels.
The expected changes come against the backdrop of tumult within the wealth management business, which has been the subject of whistleblower complaints that led to an independent investigation and probes from the Justice Department, Securities and Exchange Commission and Labor Department, The Wall Street Journal has reported.
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The bank is expected to share some information about the changes this week in an internal memo to some employees, a person familiar with the matter said. It may share more details on Thursday, when Jon Weiss, the head of Wells Fargo’s wealth and investment management unit, is scheduled to host an internal town hall, some of the people said. The changes aren’t expected to affect clients, they said.
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During the bank’s investor day presentation in mid-May, Mr. Weiss detailed “transformation and cost savings,” including better coordination across businesses and operations.
Wells Fargo has around 14,400 advisers, including those catering to wealthier individuals, with the majority in its retail brokerage. The bank doesn’t break out financial metrics for its brokerage division, but the wealth and investment management unit brings in around 9% of overall bank profits, or $714 million in the first quarter of 2018.
The details of the consolidation are still in flux. The bank is considering reducing around 1,000 jobs through attrition, some of the people said. The two divisions currently have their own back office and compliance staffs, they said.
The bank has also discussed cutting around 100 regional managers within the business, and it may ask regional managers to reapply for their roles, some of the people said. Wells Fargo asked retail banking regional managers to reapply when it restructured that business in the wake of its sales-practices scandal.
Wells Fargo disclosed in a March securities filing it was conducting an independent review of the wealth-management business.
At the time, the bank said it was assessing “whether there have been inappropriate referrals or recommendations, including with respect to rollovers for 401(k) plan participants, certain alternative investments, or referrals of brokerage customers to the company’s investment and fiduciary services business.”
Wells Fargo also disclosed that it was reviewing fee calculations within certain fiduciary and custody accounts. The bank has found instances of incorrect fees applied to certain assets and accounts that resulted in overcharging customers, according to the March filing.
