"The overwhelming majority of Envision Plans do not include investment costs."
First Vice President, Product Manager, Financial Services Group Strategic Solutions
Hyatt at the Arch, Partners In Productivity Summit, Firm Initiative Breakout
Saint Louis, MO, in front of 25 to 40 Wells Fargo Financial Advisors
Friday, September 7, 2012
I have taught CPA and Attorney Financial Ethics in North Carolina
for the last 10 years.
I have chosen to speak out for my clients, company, students, family and country
instead of living out a fraud.
My employment at Wells Fargo Advisors was terminated
on Monday, October 8, 2012
in direct retaliation for disseminating whistleblower information.
This issue has gone from Wells Fargo's ethics hot line
through Wells Fargo's executive management and an independent investigator,
to the SEC,
to the Financial Industry Regulatory Authority (FINRA) DC Office of the Whistleblower
to the NC Secretary of State, Securities Division
who investigated and referred this information to Atlanta's FINRA office,
which went back to DC and on to Kansas City's FINRA office,
the region where Wells Fargo Advisors home office is located.
September 24, 2012
From: Luginbill, Jennifer Cc: "Varvel, Bryan"
George: I have received this information you provided.
I will be ensure our assigned examiner also receives the information
to help with his investigation.
Thanks
Jennifer Anne Luginbill
Associate Director
Kansas City District Office
FINRA
120 W. 12th Street, Suite 800
Kansas Ciy, MO 64105
to sell clients and prospects on new investment ideas
or staying on a current course with a financial adviser.
George Hartzman
President and Chief Economist: Think Professional Education
Former Vice President/Investments
Fundamental Choice Portfolio Manager
Wells Fargo Advisors
Greensboro, North Carolina
This reproducible example involves Wells Fargo's Envision Plans.
Many well known firms do relatively the same thing, only different.
This “Internal Use Only” document states:
"If left at 0%, the Return Discount Rate will not be displayed
on any Envision report pages.
If you choose a Return Discount Rate >0%,
this assumption will be displayed on the Investment Plan Assumptions report page."
Meaning if the "Return Discount Rate", otherwise known as annual Investment Costs
are not included,
the information does not show up in the client presentation, even though other default assumptions do.
This is a comparison of two different Envision Plan’s offered by Wells Fargo Advisors.
"Harold Lynn" has $1,000,000 invested, with an annual investment cost of 2.5%.
Both plans have the same basic data inputs, except the second includes a 2.5% annual investment cost,
which the hypothetical client is currently paying.
These outcomes are repeatable,
meaning the entire study can be reproduced on any Wells Fargo Advisors computer
by others investigating independently.
Note the absence of the Investment Costs Harold is currently paying.
Without the investment costs included for Harold’s $1,000,000,
the Envision software generates a client compliance approved graph
indicating a high degree of wonderfulness if Harold continues to do business as usual.
Below is the same plan with the "Return Discount Rate" included on the assumptions page.
"Return Discount Rate" = Investment Cost
Again, Investment Costs are not shown on client presentations
unless the costs are entered, as seen here,
even though both presentations include everything else.
The problem with including what Harold is actually paying for his investments
is that he would need to begin with about $840,000 more to achieve similar results,
meaning the plan not including the 2.5% annual investment costs is misleading.
There are hundreds of thousands of Wells Fargo Envision Plans.
"The overwhelming majority of Envision Plans
do not include investment costs."
First Vice President, Product Manager
Financial Services Group Strategic Solutions
FINRA Rule 2210
"(d) Content Standards, (1) General Standards
(A) All member communications must be based on principles of fair dealing and good faith,
must be fair and balanced, and must provide a sound basis for evaluating the facts
in regard to any particular...service.
No member may omit any material fact or qualification if the omission,
in light of the context of the material presented,
would cause the communications to be misleading.
(B) No member may make any false, exaggerated,
unwarranted, promissory or misleading statement or claim in any communication.
No member may publish, circulate or distribute any communication
that the member knows or has reason to know
contains any untrue statement of a material fact or is otherwise false or misleading.
(C) Information may be placed in a legend or footnote
only in the event that such placement would not inhibit an investor's understanding of the communication.
(D) Members must ensure that statements are clear and not misleading
within the context in which they are made,
and that they provide balanced treatment of risks and potential benefits.
...(E) Members must consider the nature of the audience
to which the communication will be directed
and must provide details and explanations appropriate to the audience.
(F) Communications may not predict or project performance,
...or make any exaggerated or unwarranted claim, opinion or forecast...
...(2) Comparisons
Any comparison in retail communications between investments or services
must disclose all material differences between them,
including (as applicable) investment objectives, costs and expenses..."
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