Wells Fargo repays clients $40 million for excessive investment advice fees


Getty Images News Wells Fargo did not admit or deny the allegations. The agency stated that certain Wells Fargo advisors, including those acquired through a merger, agreed to reduce standard advisory fees for some clients at the time of account opening. However, in some instances, internal systems failed the SEC to account for the reduced advisory fees. As a result, Wells Fargo overcharged 10,945 accounts — which were opened prior to 2014 — for many years, through the end of last December, the SEC said.

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According to the agency, the bank’s $40 million reimbursement to affected customers includes more than $26.8 million in excessive fees plus interest.

The bank and predecessor firms — AG Edwards and Wachovia — didn’t have written policies and procedures to prevent this overbilling, the SEC said. The merger of AG Edwards and Wachovia in 2007 and Wells Fargo & Wachovia in 2008 was the result of this overbilling. )
“For years, Wells Fargo and its predecessor firms negotiated reduced advisory fees with thousands of clients, but failed to honor them,” Gurbir Grewal, director of the SEC’s enforcement division, said in a written statement.
Caroline Szyperski, a spokesperson for Wells Fargo, said the firm is “pleased to resolve this matter. “
The process which caused this problem was corrected almost a decade ago,” Szyperski stated. As noted in the settlement document, Wells Fargo Advisors has conducted a comprehensive review of affected accounts and fully reimbursed customers. “

How high fees can erode savings

Studies have shown that many investors are unaware they pay fees for financial services like investment advice or the mutual and exchange-traded funds they own.

That’s because the financial ecosystem often charges those fees behind the scenes. Fees are often calculated as a percentage of the total assets in an account. Fees are often assessed as a percentage of total assets in the account.

Excessive fees can amount to large sums of money over the long-term.

Consider this example from the SEC, in which an investor makes a $100,000 initial investment that earns 4% a year for 20 years: An investor who pays a 0.25% annual fee versus one paying 1% a year would have roughly $30,000 more after two decades — $208,000, versus $179,000.