If you rob a bank you go to jail. If the bank robs you, a few executives forfeit some stock options and bonus money. It is a travesty of justice, but senior bank management has the political clout to rip-off customers and avoid jail. They can operate with relative impunity knowing the potential gains far outweigh the penalties “if” they are caught.
Greed and corruption at big banks badly damaged the U.S. economy in 2008.
You have seen the headlines. Wells Fargo recently paid a $185 million fine for putting its financial interests ahead of its customers. The fine may sound like a lot of money, but it is a rounding error for a bank the size of Wells Fargo.
Why is this important? The scandal exposed a powerful sales culture that dominated the bank’s business practices.
So, who are the most vulnerable customers of the bank?
It is not the people who received unauthorized credit cards. It is the people who rely on Wells Fargo financial advisors to provide competent, ethical advice that helps them achieve secure retirements.
The Cross-Selling Culture
Big banks are dangerous entities. They sell traditional bank products to develop relationships with customers who need checking accounts, car loans, mortgages, and credit cards. Once the traditional relationship is established it is easy to cross-sell additional bank products.
It is easier to sell additional products to an existing client than it is to create a new client relationship.
Relationships produce trust. If the trust level is high enough, people do not question the advice they receive from financial advisors.
Apathy = Inertia
The bank knows the scandal will have very little impact on its customer base. Most of its customers will do nothing because it is a major hassle to change banks and financial advisors.
You may experience a moment of discomfort knowing the advice of the bank’s representatives can impact when you retire, how you live during retirement, and your financial security late in life.
You may even choose to believe Wells Fargo’s CEO when he told congress he was sorry that 5,300 lower level employees opened two million unauthorized accounts without the knowledge of senior management.
The bank is counting on your lack of interest to ride-out the storm that is caused by negative publicity.
Wells Fargo’s public relations department will use the tricks of trade to convince you this was a simple error in judgement by some misguided lower level employees who took the bank’s cross-selling culture a little too seriously.
Thousands of employees were fired to divert attention away from the executives who run the company.
Since no senior executive went to jail or was fired the same management team is running the bank – it will be business as usual sooner than you might think.
How to Protect Your Interests?
How do you protect your interests from a sales culture that puts bank interests first?
Follow these five tips.
- Make sure your advisor is a real expert. Ask for documentation that describes his or her years of experience, education, and applicable certifications.
- Make sure your advisor is ethical. Check his or her compliance record at Finra.org/BrokerCheck.
- Did your advisor sell you the best financial products or Wells Fargo products that produce the most revenue for the bank?
- Ask for documentation that describes all of the expenses that you pay Wells Fargo. What services do you receive for the expenses?
- Are you receiving competitive performance in relation to your tolerance for risk? Compare your results to benchmarks that reflect your investment strategy.
Or, you can select an independent financial advisor who is held to the highest ethical standard in the financial service industry. This type of advisor is a financial fiduciary who is required to put your financial interests first.