The scandal revealed in a Los Angeles Times’ story in 2013 has Wells Fargo in the headlines on a regular basis three years later, and this has prompted some recruiters to take a very pessimistic view on Wells Fargo Advisors’ ability to attract new advisors and retain existing reps.
“This is something that will stay in the press and for long time,” said Danny Sarch of Leitner Sarch Consultants. “I’m talking with some [Wells Fargo] advisors who are outright angry. They view themselves as [employees] who are watched so closely, and then there are all these accounts that were opened falsely at the bank.”
As is the case with any problem at a company that has become widespread and captured the media’s attention, “This is bad,” explained Sarch, who does not work directly for Wells Fargo. “I have to think this is affecting those advisors who have been thinking about joining it. It’s giving them pause. Do they want to go to … a tainted brand?”
In terms of retaining reps at Wells Fargo, Sarch said, “This absolutely has started some people to begin interviewing and to explore options in leaving. Maybe not this weekend – but this could accelerate their plans maybe to the months ahead … in the first quarter of 2017.”
In September, Wells Fargo agreed to pay $185 million to settle charges by regulators tied to up to 2 million possibly fake bank accounts. It has since lost contracts for one year with the state of California, the city of Chicago and others and is being investigated for possible identify-theft charges.
John Stumpf, CEO while the fake accounts were opened, resigned and was asked to give some $41 million in pay back to the bank. And Warren Buffet, who leads Wells Fargo’s largest shareholder, Berkshire-Hathaway, is set to offer his views on the firm next week.
On Wednesday, new CEO Tim Sloan addressed many of these issues in a talk to employees. He acknowledged that the effort “to restore trust in Wells Fargo is going to play out over a long period of time — weeks, months, maybe years.”
He stressed that transparency will “become increasingly important” and “the point of all our hard work will be to return our company to greatness. … Our failures are not the result of our values. I suspect they are the result of some of us forgetting to be guided by them.”
Wells Fargo began running commercials on Monday to highlight steps being taken to halt abuses. Also earlier this week, the consulting group cg42 released the results of survey that found 14% of Wells Fargo clients have decided to close their bank accounts at the firm. Wells Fargo could lose up to 30% of its clients and some $4 billion over time due to the scandal, cg42 says.
Wells Fargo’s wealth-management unit, which includes about 15,100 advisors, had a 6% year-over-year jump in revenue in the third quarter to $4.1 billion; profits jumped 12% to $677 million; and client assets were $1.7 trillion, up 9% from the year-ago period.
“We’ve also seen minimal impacts so far within our Wealth and Investment-Management business,” Sloan said during a call with analysts.
According to a recruiter who works with Wells Fargo and wished to remain anonymous, “I do not see the actual [wealth] clients moving away from their advisors because of this [scandal]. However, advisors are talking about moving or are using it as an excuse to move.” Plus, he said, “Net recruiting is slowing.”
This week, two broker-dealers said they picked up advisors from Wells Fargo Advisors: Baird brought on two veteran reps in Florida, while RBC Wealth Management recruited one in Minnesota.