The peril of ratcheting up risk in target-date glide paths was further illustrated with the revelation that Wells Fargo lost one of its largest retirement plan sponsors last year—and $600 million in assets with it.
The reason, according to Texa$aver, a supplemental retirement program for nearly 240,000 state employees and elected officials, was the way in which the change was handled.
CNBC reported Thursday that Wells Fargo gave representatives of the Employees Retirement System of Texas 90 days to accept the changes or find another manager.
More time was requested, but the request was denied, the network said, citing Georgina Bouton, assistant director of benefit contracts with the state.
“It was a big surprise,” Bouton told CNBC. “What Wells Fargo wanted to do contradicted why we picked them in the first place. I’m unhappy with the lack of professionalism at Wells Fargo and how this was conducted.”
Fredrik Axsater, head of strategic business segments at Wells Fargo Asset Management, said the change was needed to boost income for participants, but acknowledged not all were happy with the news.
“If the client is disappointed, then we are disappointed,” Axsater said. “In our mind, the client is always right.”
Axsater told the network Wells Fargo is committed to the more aggressive strategy, describing the overall reception in the marketplace as “really strong.”
The latest news is part of a string of public relation nightmares for the high-profile bank.
A lawsuit filed Nov. 17 in a Minnesota federal court accused Wells Fargo of filling its 401k plan with expensive and underperforming mutual funds that nonetheless earned fees for Wells Fargo.
“The company is also accused of failing to use its ‘enormous size’ as the third-largest 401(k) plan in the country—with nearly $40 billion in assets at one point—to negotiate for lower fees,” Bloomberg BNA reported at the time.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
