John S. Kwit drove 600 miles and knocked on 15,000 doors prospecting for clients as Edward Jones’ financial advisor. After a year and a half of such a business, he chose to take his business to the next level and grabbed an offer to manage the money as a Wells Fargo banking advisor.

But he left the company three years later, and now Wells is bringing him to arbitration with the Financial Industry Regulatory Authority in a dispute over promissory note bonuses, Kwit told ThinkAdvisor in an interview.

The hearing is set for November 10.

Kwit, 52, resigned from Wells in July 2017. In his January 2020 claim, citing the violation of two promissory notes, Wells demands that Kwit, who worked for the company in Naples, Fla., Repay balances totaling 97,482 $ plus interest and fees.

In his counterclaim, Kwit, charging with fraudulent inducement, breach of managerial duties and breach of contract, asks that all of Wells’ claims for redress be denied and that he be awarded damages of at least $ 500,000 to $ 1.25 million.

On behalf of Wells Fargo, Shea Leordeanu, senior vice president of communications, said in an email: “Whenever a financial advisor accepts a loan, we offer a transparent and clear contract on how that obligation. financial must be repaid. If the advisor leaves the business before fully repaying the promissory note, he or she must still repay the outstanding loan balance.

FINRA’s dispute resolution services did not comment, according to a spokesperson who cited a policy of not commenting on individual arbitration cases.

In the interview, Kwit argues that his payment was reduced by 75% when his contract changed at Wells and three of the four banks he was receiving referrals from were taken away from him. Money was also deducted from his paychecks to reimburse the promissory notes.

Kwit’s monthly income fell from $ 10,000 to $ 12,000 to $ 2,900.

To add to the financial pressure, around this time his eldest son and his wife’s – they are now three years old, aged 6, 4 and 2 – were diagnosed with autism and required special therapy.

Additionally, Wells began to pressure him to push clients to his private bank, an effort Kwit tried to resist because he felt it was “selling your soul,” as he explains in the interview. . Kwit specializes in serving high net worth clients.

Leordeanu, referring to private banking, said that “for clients with very sophisticated needs, the financial advisor may choose to bring in a larger Wells Fargo team with additional services for that specific client’s unique situation.” .

The private bank was so “badly run”, Kwit argues, that it was “no better than Keystone Kops”.

At the time of Kwit’s difficulties, Wells was embroiled in, among other things, his fake accounts scandal; therefore, his manager informed him not to rely on bank references. With the Wells brand tarnished, Kwit’s external referral sources had also dried up.

Before becoming Edward Jones FA, the native of LaSalle, Ill., Was an advisor to Salomon Smith Barney from 1997 to 1999, then a sales representative for medical devices. After leaving Wells, he joined Kingsview Wealth Management, then three years later Grace Advisory Group, where he worked for a year and two months.

ThinkAdvisor recently interviewed Kwit, speaking by phone from Naples. He argues that most of his challenges at Wells stemmed from “senior management and the incentives they put on their jobs. [managers] that force them to say, “If you don’t, we’ll find someone who will.” “

THINKADVISOR: How would the loss of arbitrage impact your finances?

JOHN S. KWIT: It would force me out of business. I don’t have that money. I will lose my license and my career, which puts my wife and children at risk.

What is at the heart of your counterclaim?

Wells Fargo lied by omission. That’s what they don’t tell you when you’re hired. It is not in [any] contract so you can see the red flags.

Why did you leave the firm in July 2017?

If I hadn’t left, I probably would have foreclosed on my house in August or September. I had about $ 50 million in assets under management and only took $ 15 million with me.

The former CFO of Wells, who was CFO of Norwest Corp. when she bought Wells Fargo Bank [in 1998], came with me as a customer. He was supposed to [sign with me] in Wells this Friday, but it turned out to be the day I left. So I went to talk to him.

What did you say?

“I will no longer compromise my morals and my ethics.” He agreed with me: “There was a reason I never kept a dime at Wells Fargo,” he said. “I’m not proud of what has become of it.

What did you learn about Wells while working there?

The more successful you were, the more aware you were of the information and the more they wanted you to do [questionable] things. It was as if the curtain was slowly drawn to reveal the Wizard of Oz – what was happening.

Such as?

One of the first things I noticed was that every time [a Wells Fargo customer] entered [to speak with me], they would have, for example, 15 bank accounts, five checking accounts, six savings accounts.

After a year there, the reason occurred to me: Wells paid the bankers very bad salaries, but their bonus structure was very nice. If they have opened enough checking and savings accounts and [lines] – cross-selling – they would make a living.

After you quit, when did you hear from Wells?

i have a letter [dated the same day of resignation] demand payment of my “loan” [plus unpaid balance on a signing bonus promissory note]. I thought, “This is a good one. It was a premium – not a loan! Three years later, here I am brought to arbitration.

What led to this situation?

The first two years I did very well. I had four banks [that I received referrals from], and I got the ball out of the park. I brought in almost $ 200 million among the four banks. I hit the performance matrix which qualified me for a performance bonus of $ 125,000.

How was it structured?

They call it a bonus, but they give it to you in the form of a lump sum loan. I did not have the option of taking it monthly. So I asked them to take 35% interest and give me the net. But they said no – it had to be a lump sum.

What else happened around this time?

My regional manager saturated the advisor market because of the way his premium was paid. So in a year I lost three of my four banks [because of the other advisors hired to work there]. The one I was stuck with didn’t have a lot of traffic – about 10 people walked every three or four days.

Since you are not a bank employee, you cannot call bank customers and ask them to come. You need a banker to do it. But the banker [at my branch] was more involved with credit cards and checking accounts.

What happened after spending a few years in Wells?

They hire you with one contract, but after two years of employment you work under another contract – what they call the standard operating contract. But when they hired me, they didn’t tell me about it.

What is the difference between both ?

When you sign up, they give you a guaranteed minimum payout of 30%, unless you go over the graduated pay scale. About 20 months later, they tell you that you’ll go through the standard contract in about four months.

What were the terms of that one?

With the second contract – which you don’t sign – you have to pay for the bank referrals: 12-1 / 2% on the gross subtracted from the net. Plus, you give your assistant 1-1 / 2%; so it ends up totaling about 43% of your salary. It didn’t sound like a big deal – they dance around it. But when you do the math, that’s what it is.

What happened when you were working under the second contract?

They started deducting the payments from my check. So about 43% go back to the bank to pay for the referrals, and they also deduct my performance bonus. My income went from $ 10,000 to $ 12,000 per month, after taxes and insurance, to $ 2,900.