Exclusive: Wells Fargo cuts approved list of money managers

Mon Apr 15, 2013 1:48am EDT
 
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By Jed Horowitz

NEW YORK (Reuters) - Wells Fargo & Co is slashing an approved list of money managers and investment vehicles that its stockbrokers market to the firm's wealthy clients, a change of direction that has rattled the third-largest U.S. brokerage network.

Executives said the clampdown protects clients from exposure to a plethora of investment models that have received little oversight. It will also reduce the firm's risk at a time when litigation and compliance costs are rising industry wide.

Money managers affected by the cull range from big names such as JP Morgan Asset Management Inc and Legg Mason to scores of small hedge funds and regional managers. For Legg Mason alone, the number of investment products on the list will shrink to 12 from 56, according to documents reviewed by Reuters.

Many of the smaller managers have worked with Wells' advisers for years, sometimes as former colleagues in the brokerage business.

"We want reassurance that the strategies being recommended to our clients...are something we are comfortable with," said Patricia Loepker, director of externally managed and institutional accounts at Wells Fargo Advisors, the company's brokerage unit.

"Our clients, of course, think they're good strategies because otherwise we wouldn't offer them, but it was time for us to deliver on that belief," she said.

Currently the approved list has more than 1,000 investment strategies from about 470 portfolio managers. Starting next month, brokers will no longer be allowed to solicit money for 633 of the strategies offered by 220 of the outside managers, according to documents reviewed by Reuters.

The extensive list in part reflects Wells Fargo's December 2008 acquisition of Wachovia Corp. Wachovia's broker-dealer was an amalgam of more than a dozen smaller firms - including A.G. Edwards, Prudential Securities and Everen Securities - and brokers at the firms who had ties to many little-known portfolio managers.   Continued...

 
The logo for Wells Fargo bank is pictured in downtown Los Angeles, California July 17, 2012. REUTERS/Fred Prouser