The Labor Department is looking into whether Wells Fargo & Co. has steered participants in low-cost corporate 401(k) plans into more expensive IRAs at the bank, The Wall Street Journal reported on Thursday.
Citing a person familiar with the investigation, the paper said, “Labor Department investigators also are interested in whether Wells Fargo’s retirement-plan services unit pressed account holders to buy in-house funds, generating more revenue to the bank.”
At issue in the Labor Department’s investigation is how Wells Fargo handles its clients’ retirement savings, it added.
“Under the Employee Retirement Income Security Act, entities that serve these accounts are supposed to put their clients’ interests ahead of their own.”
Regulations that govern rollovers out of 401(k)s and into IRAs upon the participant’s retirement have long been an issue, intensified by the Department of Labor’s recent attempts to establish a fiduciary standard for retirement advisors.
The Journal said the heightened scrutiny is another unwelcome development for the bank in what has been a string of headline-generating scandals.
Last week, the Consumer Financial Protection Bureau announced a $1 billion fine levied against the bank for violations surrounding its mandatory insurance program related to auto loans, as well as how it charged certain borrowers for mortgage interest rate-lock extensions.
In March, Massachusetts Secretary of Commonwealth William Galvin opened an investigation into Wells Fargo Advisors, seeking “information related to inappropriate referrals of brokerage customers to managed and advisory accounts, unsuitable recommendations of alternative investments, as well as unsuitable referrals and recommendations in connection with 401k rollovers.”
It all began with a “phantom” bank account scandal that led to the ouster of then-CEO John Stumpf in 2016. PR headaches haven’t gotten better for the bank in the time since, with legal action and regulatory sanction ongoing related to a number of issues.