Woodbury

Woodbury Financial Services (CRD #: 421) is transitioning to Osaic Wealth, following in the footsteps of another brokerage firm with a considerable disciplinary history, Royal Alliance. Woodbury Financial has been in business since 1968 and has its headquarters in Oakdale, Minnesota. This financial institution is registered as both an investment adviser with the Securities and Exchange Commission (SEC) and as a brokerage firm with the Financial Industry Regulatory Authority (FINRA).

Woodbury does business under 149 other names.

These include the following:

• Optimize Wealth Strategies
• Minkoff Capital
• Northpoint Financial
• Northstar Financial
• Next Phase Financial
• Macy Wealth
• Employer 401(K) Solutions

You can read the complete list on the firm’s BrokerCheck record.

Woodbury Financial Brokerage Services

Woodbury offers customers the following products:

• Stocks and bonds
• Variable annuities
• Mutual funds
• Exchange-traded funds (ETFs)
• Alternative investment products
• Variable life insurance
• Unit Investment Trusts (UITs)
• 529 Plans
• Retirement plans
• Consulting services

Regulatory Actions: Variable Annuities, Mutual Funds, and Omissions of Material Information

Woodbury has 35 disclosures on its BrokerCheck record. (BrokerCheck is a public database maintained by FINRA.) Disclosures can include regulatory actions and fines. These regulatory actions allege misconduct involving variable annuities and mutual funds.

Woodbury Financial has entered into numerous Acceptance, Waiver, and Consent (AWC) agreements over the years. AWCs allow brokerage firms to settle with FINRA without facing litigation. In an AWC, the firm neither admits nor denies the regulator’s allegations, but consents to the entry of the firm’s findings on its record.

$100,000 SEC Penalty

In September of 2023, the SEC issued a Cease and Desist Order alleging that Woodbury, in its capacity as a Registered Investment Adviser, failed to obtain verification by an independent public accountant of client funds and securities of which it had custody, in violation of Section 206(4) of the Advisers Act. The SEC fined Woodbury a civil penalty of $100,000.

Alleged Failure to Inform Investors of GPB’s Failure to File Audited Financial Statements

Woodbury Financial allegedly negligently failed to inform GPB Capital investors that GPB had failed to make certain filings with the SEC, including audited financial statements. Woodbury allegedly knew of the delays, as well as the offeror’s intention to complete a forensic audit. In spite of this, Woodbury representatives allegedly made 55 sales with a total principal amount of $4.6 million, which allegedly earned the firm $324,725 in commissions.

Brokers are prohibited from omitting material information – like a failure to file financial statements – when they recommend a security.

As part of the terms of the Acceptance, Waiver, and Consent agreement, Woodbury agreed to pay a $55,000 fine, as well as $300,224.98, plus interest, in restitution to customers.  

$225,000 Fine Following Alleged Variable Annuity Additions

FINRA Rule 2330 requires that brokers consider the suitability of variable annuity exchanges and additions. According to an Acceptance, Waiver, and Consent agreement, customers added $25,000 to existing variable annuity contracts from an existing variable annuity from approximately 15% of these additions.

In general, variable annuity contracts are complex and illiquid, making them unsuitable for many investors. Woodbury allegedly did not evaluate these additions to variable annuities.

• FINRA Rule 2111 requires brokers to consider the suitability of transactions – namely that the investment must suit their investor’s age, financial needs, liquidity needs, and risk tolerance, among other factors.
• FINRA Rule 3110 states that firms have a responsibility to oversee their brokers’ recommendations to ensure they comply with securities laws, including FINRA 2111.

Woodbury consented to a censure and a fine of $225,000.

Variable Annuity Allegations Concerning L-Share Contracts

FINRA Rule 2330 requires customers to be informed of the features of their variable annuity contract. An AWC alleges that Woodbury sold variable annuities that featured different share classes, including L-share contracts. Woodbury allegedly did not address the suitability concerns that arose in connection to L-share contracts. According to the AWC, L-share contracts feature higher fees and have short surrender periods. The short surrender periods make them unsuitable when combined with a long-term rider, such as the Guaranteed Minimum Income Benefit Rider (GMIB) or Guaranteed Minimum Withdrawal Benefit Rider (GMWB).

The AWC alleges that Woodbury received over $107.1 million from the sale of variable annuities including approximately $18.8 million from the sale of L-share contracts.

Woodbury consented to a censure and a fine of $250,000. 

Woodbury Fined Following Allegations Regarding Mutual Fund Discounts

Woodbury allegedly failed to ensure that certain retirement plans and charitable organization customers received the breakpoint discounts they were entitled to. FINRA alleges in an Acceptance, Waiver, and Consent agreement that Woodbury failed to adequately supervise brokers to ensure customers did not overpay for mutual fund shares.

If an investor already owns Class A shares of a mutual fund, they will be pre-qualified for sales charge waivers. As a result of Woodbury’s alleged failures to apply available sales charges, customers were allegedly overcharged by approximately $114,063 for mutual fund purchases.

As part of the terms of the AWC, Woodbury agreed to repay customers for unnecessary mutual fund sales charges, in addition to a fine of $75,000.

Woodbury Fees and Conflicts of Interest

Woodbury discloses its fees and conflicts of interest in its Customer Relationship Summary Form (Form CRS). Under Regulation Best Interest, firms are required to act in your best interest, but brokerage firms still have incentives to recommend certain products over others.

• Transaction-based fees: Each securities transaction comes with a transaction-based fee.
• Clearing or custodial charges: The clearing firm – the firm that executes the transaction – charges fees for serving accounts. Woodbury adds a markup on top of this fee.
• There are different fees for advisory services, which are ongoing fees based on the assets in your advisory account.

Woodbury Brokers Conflicts of Interest

Woodbury representatives are required to disclose conflicts of interest to their customers.

• The firm and its representatives receive a portion of securities transaction fees, and therefore brokers have an incentive to encourage you to trade more frequently and in larger amounts.
• Mutual funds and variable annuities impose additional fees.
• Woodbury receives indirect compensation and revenue sharing for certain investments where a manager or sponsor shares its revenue. It also receives clearing and custodial compensation from clearing firms based on the number of accounts and/or value of the account assets held by Woodbury and its affiliates.

Woodbury Broker Misconduct Allegations

These are examples of recent allegations made against Woodbury brokers.

• According to recent allegations, a Woodbury broker misrepresented a variable annuity.
• Another investor alleged that a Woodbury broker made an unsuitable recommendation to invest additional funds into an existing variable annuity.
• One investor alleged that a Woodbury broker traded excessively in their account and charged excessive fees.

Kurta Law Can Help

If you lost money after working with a Woodbury broker, consider contacting a securities attorney. Our investment fraud lawyers are experts in broker misconduct and regulatory rules and only collect a fee if we win your case. Call (877) 600-0098 or email info@kurtalawfirm.com.