Want an inside look at what happens behind closed doors at big Wall St. firms? Then read on!
Over my years at Wells Fargo, I saw a lot of things happen "behind the curtain." Things that the general public doesn’t know about, but probably should. One of those things has been exposed over the last two weeks. In case you missed it…
The lender [Wells Fargo] opened more than 2 million accounts that consumers may not have known about, the Consumer Financial Protection Bureau said in a statement Thursday. Wells Fargo, which fired 5,300 employees over the improper sales practices, agreed to pay a record $100 million fine. (Source: Bloomberg.com Full Article)
Wells Fargo has strict quotas regulating the number of daily "solutions" that its bankers must reach; these "solutions" include the opening of all new banking and credit card accounts. Managers constantly hound, berate, demean and threaten employees to meet these unreachable quotas. Managers often tell employees to do whatever it takes to reach their quotas. Employees who do not reach their quotas are often…threatened with termination. (Source: Bloomberg.com Full Article)
This shouldn't be a surprise. There's rotten apples in every sales department. What's surprising is that your "Personal Banker" is a salesperson!!!
"Retail Financial Services" includes anything that touches Joe & Jane Public - banking, mortgages, investments, insurance, etc. It's like any other industry. It exists to make money. Which is totally fine. There's nothing wrong with that. Businesses earning profits is what keeps our economy ticking along.
What's wrong with the retail financial services industry is that it slings its wares to unsuspecting customers under the guise of "professional advice." These firms do everything they can to cover up the fact that the people selling their products are actually salespeople.
That's why your "Personal Banker" is NOT called your "Bank Product Account Executive." That's why your "Financial Consultant" is NOT called your "Insurance Sales Agent." And that's why your "Financial Advisor" is not called your "Investment Product Sales Rep."
And yet all of these people at large, Wall St. firms are SALESPEOPLE. There's an inherent conflict of interest in this. You can't be a "Professional Advisor" and a Salesperson at the same time. For example, is your financial advisor recommending an investment because it's right for you or because it will help him or her meet a sales quota or bonus incentive?
The sales culture at large financial services firms is unavoidable. It's who they are. It's engrained in everything they do. Let me further illustrate the point with a personal example.
In my second year at Wells Fargo, I was put on a "Performance Improvement Plan." I was given 3 months to improve my "numbers" or be terminated.
My "numbers" were not what you might think. It was not how many clients I had developed financial plans for. Or how much money I had saved my clients in taxes. Or how many clients' portfolios I had fixed. My "number" was how much revenue I had generated for Wells Fargo in the last 12 months.
That is how "Financial Advisors" at large brokerage firms are measured - by how much product they sell (Merrill Lynch, Morgan Stanley, Wells Fargo Advisors, Ameriprise, etc.) Management is not focused on the clients. They are focused on the fees clients generate.
It gets worse. Management sternly suggested I sell my clients high-commissioned investment products to get my numbers up.
Think about that for a second. Personal finance is super complicated which is why clients put their trust in a Financial Advisor. Clients come to me and say "I don't know what I'm doing. Please help me." I take that responsibility very, very seriously. Honoring that trust is what gets me out of bed at 5:15am every morning.
And here is management telling me to take advantage of my clients' trust to produce more fees! Yech! Blech! That's disgusting. Just thinking about it makes me vomit in my mouth a little.
And in case you think this guy was just a bad apple, he's not. He was actually a great sales manager. But he was a sales manager. The same sales carrot and sales stick he used on me was used on him by his regional manager and the regional VP above him and on and on and on. And it's not just Wells Fargo either. These conversations happen in every branch office of every big brokerage firm in the country. That's just how the brokerage industry works.
So I quietly refused. I just nodded my head and kept doing what was right for my clients (which did NOT include selling them something they didn't need even if my job depended on it).
I don't know about you, but I have found many times in my life that when you don't sell out…when you stick to your guns…when do the right thing even though it's hard…the universe rewards you in random and unexpected ways.
Over the next 3 months, I nearly doubled my client base. The stars aligned and more new clients came aboard in those 3 months than had in all of my first 2 years. I was taken off the Performance Improvement Plan and even had people from headquarters call me to find out how I had done it.
I’m living proof that it is possible to work in a sales environment like Wells Fargo and still hold yourself accountable as a fiduciary Financial Professional, not an Investment Product Sales Rep. But people like me are rare. Trust me, it ain't easy sticking to your guns and doing only what's right for your clients when you have a sales quota hanging over your head.
Independent, fee-based financial planners, on the other hand, don't live in that sales world. We do not work for the Wall St. machine. We are not sales people. We are professionals like doctors, lawyers and CPAs. We put our clients' interests above our own. We don't have upper management pressuring us to open accounts. We don't get bonus incentives to sell their latest product. We have Certified Financial Planner certificates hanging on our walls, not sales awards. And when you work with us you can feel safe knowing that we give our recommendations - not because they'll benefit us or our firm - but because they are what's right for you and your family.