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Lawyers Who Got $79M Deferred Comp Deal for Wells FAs Target Other Firms

By Miriam Rozen October 5, 2020

Lawyers who represented ex-Wells Fargo FAs and won a $79 million class action settlement from the wirehouse after a three-year court battle over deferred compensation intend to pursue other firms.

John Edwards and David Siegel, both partners at the Houston-based Ajamie law firm, were among a team of lawyers that represented the ex-Wells Fargo FAs who alleged that their former employer’s deferred compensation plan violated rules under the Employee Retirement Income Security Act of 1974.

Wells Fargo settled the lawsuit in January. A Wells Fargo spokesperson said in February that the wirehouse “has consistently denied the allegations” but “believe that resolving this matter is in the best interest of the company.”

The settlement was approved by the court in July. The deal netted about $31,000 for each FA in the class, or about 28% of their forfeited funds, according to the approval order. The attorney fees amounted to 25% of the settlement, or $19.75 million, plus $390,053 in expenses, the same order says.

The lawyers from Ajamie tell FA-IQ they are evaluating the legality of other deferred compensation plans, including those at other wirehouses. They say they are focusing on plans that require FAs to forfeit deferred compensation when they exit their firms.

They say they will target plans that defer compensation beyond just a few years. That arguably qualifies those plans as Erisa-covered plans and thus holds them to the law’s non-forfeiture and vesting rules, they say.

In the lawsuit against Wells Fargo, filed in February 2017, the former FAs alleged that the wirehouse’s plan deferred compensation for long enough — 10 years for some of it — so it qualified as an Erisa-covered plan. The federal judge who certified the class action in October 2018 noted that despite the deferment period, the plan required the FAs to forfeit compensation when they left.

“The companies make it very difficult for the participants to get a hold of their [deferred compensation] plan documents, which makes it difficult for attorneys to evaluate whether the plans are legal or not.”
John Edwards
In response, Wells Fargo argued that its plan qualified as a “top hat” plan because it was offered to only a select number of employees. The “top hat” argument, which would make it exempt from Erisa vesting and non-forfeiture rules, became a central issue in the case, the judge wrote in his order at the time.

Ajamie’s Edwards says the law “unfortunately is not exactly clear” on when a deferred bonus compensation plan should be governed by Erisa rules. The longer the deferral period, the more likely the plan should abide by Erisa rules, he says.

Despite that lack of clarity, the lawyers say they are encouraged by the Wells Fargo settlement to press their arguments with similar plans.

Other hurdles exist, however, such as advisors’ often sketchy details of their own deferred compensation plans, Edwards says.

"The companies make it very difficult for the participants to get a hold of their plan documents, which makes it difficult for attorneys to evaluate whether the plans are legal or not,” he says.

Edwards recommends advisors investigate details by contacting plan administrators. Some plan documents also have been disclosed in other litigation, the lawyers say.

The lawyers say other advisors from different firms have contacted them since the Wells Fargo settlement, but they decline to name the firms. They also decline to say if they have made enough progress building a case to file a complaint. Disclosing names and discussing progress would give defendants “a head start,” Siegel says.


Andrew Tasnady, owner of compensation consulting firm Tasnady Associates, says many wirehouse FAs are required to forfeit deferred compensation if they exit before vesting kicks in. He says advisors typically must stay put for three to eight years after an award determination to get the money.

“If you leave prior to vesting, then [the compensation] was never earned,” he says.

In the past decade, most of the wirehouses adjusted their FAs’ bonus awards and deferred portions of them, but the firms did so without reducing non-deferred compensation, Tasnady says.

Tasnady says the wirehouses have generally refrained from bulking up the deferred portion of their FAs’ compensation in the past two years. He says that’s because the wirehouses know “advisors need and want” their non-deferred income and value it more than deferred awards. There are some advisors who value paying lower income taxes because of deferred income, however, he says.

As part of its settlement, Wells Fargo closed the deferred compensation plan that was the subject of the settled lawsuit.

Meanwhile, in January 2019, Morgan Stanley CEO James Gorman said his firm reversed its “very aggressive deferral program.” The wirehouse reduced the portion of some of its FAs’ compensation that previously the firm deferred. A person familiar with Morgan Stanley’s compensation, who asked not to be named, said the FAs’ deferred compensation presently vests in stages during a six-year time frame.

UBS and Merrill Lynch spokespersons did not respond by this publication’s deadline to questions about their FAs’ deferred compensation plans.

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Tags:  Fees and compensation , Staffing and recruiting , Regulatory/legal issues , Retirement planning , Merrill Lynch , Morgan Stanley , Tasnady Associates , Wells Fargo , UBS

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