This article focuses on Wells Fargo broker recruitment practices. Recently it has been reported that Credit Suisse Group and Wells Fargo have recently agreed to a recruiting arrangement whereby Credit Suisse’s U.S. brokers will be able to “smoothly” transition their practices and clients to Wells Fargo Advisers by early next year. While the press has been focused on some Credit Suisse advisers’ concerns over the amount of upfront bonuses being offered, in our opinion there may be more to worry about when it comes to transferring based on our clients’ history with Wells Fargo.
Having reviewed several Wells Fargo recruitment methods over the past several years, with clients who had issues with Wells Fargo, it behooves brokers to be on guard as to what is included or not included in any proposed recruitment agreements before transferring. For example, if there are aspects of one’s practice which are critical to its success, such as physical location, office, city, or town to work from so as to maintain client contact, one should insist that such be input into the agreement. Similarly, if one of the carrots being offered is another book of business, one should make sure that the book of business does not include a long history of complaints involving the former broker which may end up on your CRD or FINRA BrokerCheck as the new broker who took over the last broker’s problematic book.
Often times brokers are misled by numerous oral representations made by unethical recruiters and the broker’s sole focus is on the upfront bonus funds being offered, rather than the many other concerns brokers have in transferring firms, such as office location and how long one would remain in such location, assistance provided in transferring one’s book, number of assistants to be assigned, supposed “teams” that will assist in processing ACAT s and transferring one’s book of clients, ability to sell one’s book of business on retirement, etc. Typically, lost within the other verbiage of a written recruitment offer Wells Fargo utilizes is what is known in contract law as a Merger Clause such as:
You further acknowledge that no one has made any oral representations to you with respect to the terms of your employment at Wells Fargo which are not contained herein and that you are not relying on any such representations in connection with your decision to accept employment with Wells Fargo
As many of our clients have unfortunately learned, such Merger Clause may (although not always) successfully negate any and all material oral representations made to you during the recruitment process, other than those that are included in the written proposal. Therefore, it is wise for all advisers, especially those considering Wells Fargo, to retain counsel experienced with such agreements. Otherwise, don’t be surprised that when you arrive at Wells, your office location closes months later requiring you and your clients to travel many miles away to a new office, or perhaps the assistance in transitioning does not materialize, or that new book of business you were promised turns into a toxic book leading to customer complaints which had nothing to do with you. Once one realizes that the firm is not following through with oral representations made during the recruitment process, one has already executed the promissory notes, and perhaps spent the upfront bonus funds provided, creating the obligation to repay such notes if you decide then to change firms again, so as to try to rectify the problems. In summary, failure to cross the T’s and dot the I’s can have very long term and costly consequences.
As detailed in our Linked In article last August 2015 , too many advisers are penny wise and pound foolish in signing first and asking questions later, resulting in spending many thousands more in legal fees in trying to correct the damage that could have been avoided by having experienced counsel involved from the beginning of the negotiation process.
Stuart D. Meissner Esq