When was the last time you heard of a company firing over 5,000 employees due to fraud? My answer is never. I’ve never heard of a company firing 2% of their workforce and citing fraud. Outside of a recession or a merger, a company announcing they are firing 5,000 employees is rare. If I had to give you one guess what industry such a company came from I’m willing to bet you’d guess the financial services industry…and you’d be right.
Wells Fargo, in a stunning announcement this week, fired 5,300 employees for opening up deposit and credit card accounts for customers without their permission. This action is unprecedented in its scale, but not in its source. We’ve come to expect bad behavior from big banks and Wells Fargo has delivered (normally it’s Merrill Lynch that delivers). Big banking has moved on after the financial crisis that nearly wiped them all off the map and is now back in action using poor incentive plans to drive bank sales…is this even surprising? No, except for the fact that the people being fired are regular people, not corporate bankers.
If Wells Fargo is willing to treat their banking customers with such disrespect, how do they treat their brokerage customers with whom they owe no fiduciary duty?
The bigger question is how such a widespread fraud went undetected by the company (it took an LA Times story). My suspicion is that it didn’t go undetected, it was encouraged. What bothers me most about this reveal is that no one is being prosecuted criminally, no one at the top has lost their job. The CEO made nearly $20 million last year…and still has his job. None of the senior executives have been fired and the fine of $185 million will not send any signal at all (despite the CFPB handing down its largest fine ever). The net income in the second quarter of 2016 for Wells Fargo was $5.6 billion. $185 million doesn’t make a dent. Bad behavior will continue.
This is a big deal. You should not do business with Wells Fargo if you don’t have to. The regulators have failed once again and ethics at American banking institutions are still lacking, if this doesn’t scare you, you haven’t been paying attention.
Scott Dauenhauer, CFP, MPAS, AIF