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Financial Planning > Behavioral Finance

Buffett Gives Wells Fargo Advice on Its CEO Search

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With all eyes on Wells Fargo amid its search for a new CEO, the leader of the bank’s top shareholder is voicing his two cents.

Warren Buffett, chairman of Berkshire Hathaway, recently told the Financial Times that Wells Fargo needed to look in new places for a fresh chief executive, following Tim Sloan’s departure on March 28. (The bank’s general counsel, Allen Parker, replaced him on an interim basis.)

“They just have to come from someplace [outside Wells] and they shouldn’t come from Wall Street,” Buffett said in the FT. “They probably shouldn’t come from JPMorgan or Goldman Sachs.

Buffett’s comments are attracting lots of press as the bank says it is selling its retirement-plan business to Principal Financial Group for $1.2 billion. The move appears to be part of Wells Fargo’s plan to restructure operations following its fake-accounts scandal, which led the Federal Reserve to impose an asset growth cap on the troubled bank.

Who Will It Be?

While there have been rumors that several ex-Goldman Sachs leaders — such as Gary Cohn and Harvey Schwartz — are under consideration, the latest list of CEO candidates from Bloomberg includes JPMorgan Co-President Gordon Smith; JPMorgan Chief Financial Officer Marianne Lake; Dean Athanasia, head of Bank of America’s consumer and small-business unit; Jane Fraser, head of Citigroup’s Latin America business; and Matt Zames, president of Cerberus Capital.

In Buffett’s mind, though, these are not the right folks for the job given the hot seat that Wells Fargo is in.

“There are plenty of good people to run it [from the Wall Street banks], but they are automatically going to draw the ire of a significant percentage of the Senate and the U.S. House of Representatives, and that’s just not smart,” he told the London-based newspaper.

One possible candidate is Bill Demchak of Pittsburgh-based PNC Financial Services, though he is a former JPMorgan executive.

Wells Fargo is set to report its first-quarter earnings on Friday.

In the fourth quarter of 2018, its net income fell about 1.5% to $6.06 billion, or $1.21 per share, vs. $6.15 billion, or $1.16 per share, a year ago. Revenue dropped 5% to $21 billion.  

It had 13,968 advisors as of Dec. 31, down nearly 600 from a year ago and over 100 from the prior quarter. Since the bank’s fake-accounts scandal erupted in fall 2016, when it had 15,086 registered reps, the bank’s wealth unit has lost 1,118 advisors.

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