The Labor Department is reportedly looking into whether Wells Fargo & Co. has been pushing customers who have low-cost corporate 401(k) plans to move their holdings instead into more expensive individual retirement accounts, the Wall Street Journal reports.
The federal investigation is also looking into whether customers were encouraged to buy in-house funds in order to raise more money for the bank. The issue at play regards the Employee Retirement Income Security Act which requires the bankers that serve retirement accounts to put the interest of their client ahead of those of the bank.
People familiar with the matter told the Journal that the bank has workers retention goals associated with keeping retirement accounts in-house. Those individuals also allege that bankers would put clients’ money intentionally in shares that involve a high fee.
During its annual financial report last month, Wells Fargo acknowledged the federal inquiries and said “A review of certain activities within Wealth and Investment Management (WIM) being conducted by the Board, in response to inquiries from federal government agencies, is 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.”
Last week, the bank agreed to pay a $1 billion fine over misconduct claims surrounding its auto and mortgage lending businesses.