Wells Fargo cuts reliance on big proxy advisers with in-house system

By Manya Saini

Jan 28 (Reuters) – Wells Fargo’s wealth and investment management unit launched an internal proxy voting service on Wednesday, cutting its reliance on big proxy advisory firms that are facing criticism for putting social agendas over shareholder value.

The U.S. banking giant also severed its ties with proxy adviser ISS, a source familiar with the matter told Reuters. ISS did not immediately respond to a request for comment.

Conservatives and large fund managers have argued that too often proxy advisers urge shareholders to vote against boards or directors and place excessive weight on climate and social priorities.

These firms analyze shareholder proposals and corporate governance matters, issuing voting recommendations to institutional investors ahead of annual meetings.

Wells Fargo said it will direct proxy voting under its own custom policy and voting instructions focused on clients’ long-term economic interests, bringing greater independence.

This would streamline the proxy voting process and reduces reliance on third parties, the bank said, as it expanded its ties with fintech firm Broadridge Financial Solutions as part of the shift.

Wells Fargo’s wealth and investment management division has $2.5 trillion in client assets and is one of the largest wealth managers in the U.S. The news was first reported by the Wall Street Journal earlier in the day.

Earlier this month, rival bank JPMorgan’s asset management division said it no longer plans to use proxy advisers in the U.S.

In December, U.S. President Donald Trump signed an executive order to increase oversight of the proxy advisory industry, on the grounds that top firms often “advance and prioritize radical politically-motivated agendas”.

Corporate governance analysts and attorneys have, however, said the White House order could weaken shareholder rights, while the industry has repeatedly denied wrongdoing and argued its recommendations are independent of any bias.

(Reporting by Manya Saini in Bengaluru; Editing by Arun Koyyur)