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.
-SH
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
