Wells Trainee Class-Action Settlement Spotlights Rivals’ Policies
A $3.5 million class action settlement by Wells Fargo Advisors is shedding light on hardball practices that many brokerage firms have imposed on industry newcomers.
Wells’s private client group of more than 11,000 brokers last week agreed to end its policy of requiring people in its training programs who leave voluntarily or involuntarily within five years to pay as much as $55,000 to cover what it said was the cost of its training.
Edward Jones continues to have a mandatory reimbursement policy while Merrill Lynch ended a similar requirement in last year’s fourth quarter, company spokespeople said.
“Edward Jones believes the training provided to our financial advisors is among the best in the industry,” spokesman John Boul wrote in an emailed statement. “Depending on the circumstances, we will pursue reimbursement of these costs when a new financial advisor leaves Edward Jones for a competing firm.”
Morgan Stanley ended its contractual reimbursement requirement with people entering its advisor training program “years ago,” a spokeswoman said.
Wells Fargo was sued by four plaintiffs on behalf a class estimated at around 2,000 people who worked for its brokerage unit at various times between 2009 and the end of 2016. The firm has established a $300,000 fund to reimburse former trainees who paid the bills for the two-year training program and will pay $3.2 million to trainees who can prove they were eligible for unpaid overtime before they were given production numbers entitling them to conventional payouts.
Lawyers for the plaintiffs alleged that Wells violated federal and certain state labor laws by failing to pay overtime and by overstating the value of training that employees received.
To be sure, some firms that hired émigrés from Wells and other firms’ trainee programs have covered Wells’ dunning notices, said Linda Friedman, a partner at Stowell & Friedman in Chicago, which represented the trainees who filed the class-action lawsuit in March 2014.