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

In this article * WFC Follow your favorite stocksCREATE FREE ACCOUNT Spencer Platt | Getty Images News | Getty Images Wells Fargo paid back $40 million to almost 11,000 customers who for

years were overcharged on fees for investment advice, the Securities and Exchange Commission said Friday. The bank also agreed to pay a $35 million civil penalty to settle SEC charges. Wells

Fargo neither admitted nor denied the allegations, the agency said. Certain Wells Fargo financial advisors — including those from legacy firms acquired during a merger — agreed to reduce

some clients' standard advisory fees at the time their accounts were opened, according to the SEC. However, internal systems failed to account for those reduced advisory fees in some

cases, the SEC said. 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. MORE FROM

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all-time high, but 2008 was still worse 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. (AG Edwards and Wachovia

merged in 2007; Wells Fargo and Wachovia then did so in 2008.) "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 that caused this issue was corrected nearly a decade ago," Szyperski said. "And, as noted in the settlement documents,

Wells Fargo Advisors conducted a thorough review of accounts and has fully reimbursed affected 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. Customers typically don't write a monthly check or get money withdrawn from their bank accounts for such services; instead, firms often collect fees from the

financial account, like an individual retirement account or a 401(k) plan. 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.