NEW YORK, Oct 14 (Reuters) - Wells Fargo & Co’s wealth management unit has changed the way it reports cross-selling, the strategy at the heart of the scandal over its aggressive sales targets, and now reporting assets referred from bank employees.
The wealth management business reported a gain of $1 billion in “referred investment assets” in the third quarter after referrals from employees in bank branches, according to corporate filings. The figure is in line with prior trends, the bank said on Friday.
Cross-selling, or getting customers to buy products and services from several business lines, was previously reported as a figure that showed the average number of accounts held by a client household if that client also had retail bank accounts, like checking or savings accounts.
In August 2015, the last quarter for which it was reported, the bank said the average wealth management client household had 10.52 accounts, the highest average account number of any of the bank’s business divisions.
Meanwhile, Wells Fargo said total profits dropped for the fourth straight quarter as it set aside funds for potential legal costs from a bogus-account scandal that led to its chief executive officer stepping down.
The wealth business reported profit jumped 16 percent over the previous quarter to $677 million on higher asset-based fees and a greater percentage of brokers’ paychecks being deferred.
Cross-selling is a widespread practice at banks and brokerages, but the affair at Wells Fargo’s community bank raised questions about whether it is appropriate to set aggressive sales targets for employees, and whether customers really need all the products offered.
Massachusetts regulators recently charged Morgan Stanley with “dishonest and unethical conduct” for having pushed its brokers to sell loans to their clients.
Last quarter, Wells Fargo’s wealth and investment management unit said it was “evaluating changes in our cross-sell methodology to better align our metrics with ongoing changes in WIM’s business and products,” according to corporate filings.
Wells Fargo did not immediately respond to request for comment. (Editing by Jeffrey Benkoe)