Wells Fargo Advisors has been hit with a class action lawsuit over the interest rates it offers in its cash sweep program, despite recent rate increases. According to Financial Planning, the lawsuit accuses Wells Fargo of prioritizing its profits over customers' returns by providing minimal interest on their cash deposits.

The lead plaintiff, Keith Bujold, a current Wells customer, claims that the firm's disclosures about the program contained "material misrepresentations and omitted material information," even after updates in late 2023. The suit seeks injunctive relief, damages, and legal fees.

This lawsuit comes after the Securities and Exchange Commission (SEC) began investigating Wells Fargo's cash sweep options last October, part of a broader examination of revenue-generating practices by advisers. Wells Fargo isn't alone in facing legal challenges over its cash sweep program; similar suits have been filed against other major financial firms like Merrill Lynch, Morgan Stanley, LPL Financial, and Ameriprise Financial.

While Wells Fargo and Morgan Stanley have raised their sweep rates, others like Ameriprise, LPL, Stifel Financial, and Raymond James have not indicated any plans to follow suit. The outcome of these legal actions could have significant implications for how these programs are structured across the industry.

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