Earlier this year, the Federal Reserve cited Wells Fargo’s “pervasive and persistent misconduct” as reasoning for doling out one of their harshest punishments ever – that Wells Fargo was no longer allowed to expand their business until they took actionable steps to right the many wrongs they’ve done in the past several years.
Wells Fargo is slimy, to say the least. I’m not a fan of unnecessarily bashing companies, especially financial institutions. I feel strongly that every organization has room for improvement and growth, including my own, and consumers need to weigh the pros and cons of working with an individual or a company against their personal goals before making any snap judgements. However, in the case of Wells Fargo, I no longer believe that to be true.
As a fee-only, fiduciary advisor, I look out for the best interest of my clients. What’s best for them always goes ahead of what’s best for me, or what might be best for a financial organization we’re working with. Wells Fargo has repeatedly violated that threshold with how they treat their account holders and investors, and I’m done standing for it. Unfortunately, not everyone is aware of the problems that Wells Fargo has faced in previous years, let alone the Federal Reserve’s recent ruling to halt their expansion as a national bank.
So, today we’re going to change that. Let’s go over a few reasons that Wells Fargo has endangered their account holders, and what you need to watch for if you’ve chosen to work with them in any capacity in the past.
Recent Reports of Illegal Behavior
In 2016, it was revealed that Wells Fargo had opened several million fake accounts. The bank was fined $185 million by several regulators for opening these accounts without their customers’ permission. It quickly came out that over 5,000 Wells Fargo employees had opened fake accounts – and had gotten fired for it! And those are only the employees who got caught! So, why did this happen? And why in the world didn’t Wells Fargo react in a timely manner?
Many have speculated that the freakishly high number of fake accounts opened by Wells Fargo was a direct result of their strict quotas regulating the “solutions” (sales credits) their bankers must reach each day. The “solutions” that a banker could reach included (shocker) opening a credit card or bank account. The quotas were essentially unreachable, and so, as is so often the case, employees looked for a workaround.
Should the employees have opened these fake accounts? Absolutely not. But I think the bigger questions here reflect back on Wells Fargo, one of the nation’s largest banks:
- Why were their solution quotas so difficult to reach in the first place? Were consumers no longer interested in opening accounts there?
- How were they not more closely regulating accounts being opened?
- Why were their bankers held to a standard of sales rather than exceptional customer service?
There’s a lot wrong with this picture. Whenever a financial institution starts focusing on the amount of money they can make rather than what’s in their customer’s best interest, they’ve gotten it wrong. I’m not naïve, I fully understand that most financial institutions make money when they hold your investment or banking accounts. I also understand that when Wells Fargo cross-sells their services to offer more “solutions” to consumers, they’re more likely to have those same consumers turn to them for bigger money-making products like mortgages or loans. That’s why fee-only, fiduciary financial planners like myself exist – to make sure that consumers aren’t taken advantage of.
What I find so disturbing is that, of the incredibly large number of people impacted by this event, thousands of them were charged fees, or had their credit information stolen because someone accessed a credit card they didn’t know existed.
Keep in mind that all of this has been happening over the course of the past two years. They have since been accused of running a “criminal enterprise” by the federal government, they’ve been investigated by the SEC and multiple regulators, they’ve been issued fines, they’ve been pushed to let go of a large number of their senior executives and board members, and that’s just the start of it.
Most recently, in February of this year, the Federal Reserve formally punished Wells Fargo with their limit on whether or not the bank was permitted to expand their assets.
Why am I telling you this? Because mis-behaving businesses deserve everything that comes to them and people need to know what company they’re working with.
But, digging a little bit deeper, I firmly believe it’s my fiduciary duty to help you understand what’s going on with the major players of the financial world. Wells Fargo, inexplicably, is a major player, and I want you to know how and when to protect yourself. The sad truth is that Wells Fargo is not the only nefarious financial institution in the world. It’s all too often up to you and your financial advisor to protect your money. If you have questions about the best way to protect yourself, feel free to contact me. I’d love to talk to you about the best ways to watch your money, and what red flags you should look for when working with an institution.