Tuesday, October 4, 2016

Things Get Sticky at Wells Fargo

Last week I watched my former CEO squirm under questioning from the Senate Banking Committee.  The senators wondered why Wells Fargo defrauded over two million customers for no apparent financial gain. 

I’ll tell you why:  Sticky Money!

Studies show that cross-selling multiple business lines increases profitability, customer loyalty and name recognition. 

Nobody’s going to forget their name anytime soon. 

Front-line employees were threatened with termination if they didn’t open unrealistic numbers of new accounts.  When customers didn’t buy, some of those employees forged millions of new accounts to postpone getting kicked out in the street.  Others quit rather than commit federal crimes. 

When the stink-alarms went off, 5,300 employees were fired – but the big-shots kept their bonuses for the imaginary business. 

We haven’t heard the last of it.  Class-action suits from fired and abused employees are springing up like toadstools in a feedlot.

I left Wells about the same time this started for some of the same reasons.  The 2012 compensation package penalized my regular commissions if I didn’t sell bank products.  Every bank-broker I’ve talked to since tells me the pressure keeps getting worse where they work too.

I knew I was leaving so I blathered, “Yeah, gotta get on that..” and then didn’t.

One helpful suggestion from the brass still sticks in my craw.  I got a list of four clients who were pre-approved for lines-of-credit on their securities.  None of them were a day under 70 – people who would pound the desk in pride that they didn’t owe a darned dime (usually something more colorful).

I was supposed to talk them into hocking their stocks to pay for their granddaughter’s wedding or take a pay cut.

Welcome to sticky money. 

When you owe on your account – when your mortgage rate is contingent on your securities business – when your credit cards are tied to your brokerage account, it’s harder to leave.  You stick to the firm.

I couldn’t have brought grandparents who owed on Chelsea’s wedding with me.  They’d be stuck.  With enough clients like that, I’d be stuck too.  When your deferred compensation depends on selling things your clients don’t need (and, as it turned out, wouldn’t even know they had), you’re double stuck.  And every new conflict-of-interest is tougher to refuse.

I saw this coming.

Maybe not swindling millions of customers – but I smelled something rotten the day Wells Fargo told me my clients weren’t profitable enough doing what was in their best interests.

My clients deserve better.  I deserve better.  At this shop, everyone is treated with respect and dignity.  It’s how I was raised.

If that’s how you want to be treated, I hope you’ll give me a call. 

It’s a long shot.  You probably don’t know me from Adam.  But if you hate feeling sticky, we’ve already got a lot in common.  


Related note:  I watch golf on TV hoping I’ll learn something. TV golf comes with lots of financial commercials targeting affluent investors – people I serve.  Towards the end of the ad, you often see a list of other things the company does – things like: private banking, underwriting, trading, commercial lending and international finance.

I suppose viewers are supposed to think they are solid and diversified. 

Some of them. 

My take is that their other clients are more important than mine. The big ones eat the little ones in this business.  If somebody has to burn for a greedy mistake, make sure you have a chair when the music stops. 

See, it works!  Keep your eye on the ball and avoid the hazards! 

The opinions expressed here are those of Skip Helms and do not necessarily reflect those of LPL Financial or anyone else. Investing involves risks, including the loss of principal. Past performance does not guarantee future results. Please consider potential transactions carefully and read all appropriate materials before investing or sending money. Securities offered through LPL Financial, Member FINRA/SIPC