Wells Fargo advisors will no longer be able to service clients abroad, according to a company memo.
Wells Fargo plans to stop catering to clients outside the U.S. in an effort to “simplify the business,” said Jim Hays, head of Wells Fargo Advisors and the wealth and investment management client relationship group, in a memo to advisors obtained by WealthManagement.com.
“Within the WIM client relationship Group, we also want to focus on our core business, which is serving clients who primarily reside in the United States,” Hays wrote. “As such, we have decided to exit the international segment of our business. Because this segment requires different processes, approaches, and infrastructure maintenance, we have determined we will simplify the business.”
Starting Jan. 19, the firm will no longer allow advisors to open new brokerage accounts, Wells Fargo Private Bank, or Abbot Downing accounts for residents outside the United States. The firm will also start a “methodical exit process” for existing international accounts this month, which will take nine months to complete.
One press report out of the U.S. said that the business was understood to look after around US$40bn on behalf of its international clientele, around 80% of whom were based in Latin America.
“We know this is an especially difficult decision for our international-focused financial advisors and their clients, and also for other advisors with international clients in their books,” Hays wrote. “We will work very directly with all affected advisors about their individual options along with our expectations to eventually exit relationships in a way that is consistent with regulatory expectations and best serves the interests of our clients during this transition.”
The firm will continue to serve accounts of active-duty U.S. military and U.S. government employees stationed abroad.
Wells Fargo is not the first to move away from international business. In 2014, RBC shut down its wealth management operations in the Caribbean and closed some of its international advisory and private banking groups in the U.S. and Canada.
Several years ago, Merrill Lynch limited the number of countries where advisors could do international business and instituted higher minimums for clients in certain countries. Three former Merrill advisors filed a class action lawsuit against the firm, claiming the new policies for international clients hurt their business.
“A lot of the big firms are moving away and making it more difficult to work with clients overseas because there’s a level of risk associated with it,” said Barbara Herman, a senior vice president at Diamond Consultants. “You’ve got money laundering rules, all kinds of federal rules that you have to be mindful of. Then you also have rules in the local country—the client’s local country—to deal with that can oftentimes make it difficult to work with a client in another country. It can be fraught with challenges that create legal exposure as well as a financial risk.”
In deciding to discontinue looking after American clients who live outside of the U.S., because of the added hassle such clients require, Wells Fargo adds its name to a long list of companies, including other major American banks, that have also opted to walk away from their overseas American clients in the decade since the U.S. Foreign Account Tax Compliance Act was signed into law, in 2010.
Source: wealthmanagement.com, americanexpatfinance.com