Time to rebrand Wells Fargo
The seemingly never-ending Wells Fargo bank scandal is the most serious ever in the banking industry. While other bank scandals often were limited to one area of a bank, oftentimes not impacting retail customers, Wells Fargo’s frauds have touched almost all customers. This has ruined the bank’s once pristine reputation and caused a lack of confidence in its ability to provide fair service.
Wells Fargo is a very special bank, since it holds the first national bank charter, the result of its predecessor First Union’s acquisition of Philadelphia’s largest bank, CoreStates. It is also special to me as I’ve had multiple accounts there for decades.
Serious banking scandals require serious responses. Banking regulators have taken many actions against Wells Fargo in recent years, but it’s a classic example of too little too late. We must ask where they were when the fake accounts scandal happened — the bank’s first major stumble — and why did it take a Los Angeles Times journalist to expose it?
CEO Tim Sloan’s recent departure is one step in the right direction, but much more needs to be done. When a problem is this serious and so long running, a bank must sincerely apologize and make restitutions to impacted customers. Then it must take three very difficult steps.
First, there must be a total repopulation of culpable senior management. Sloan should have never been made CEO in the first place, given his decades in senior positions at the scandal-ridden bank, including some since he was CEO, which calls into question those board members supporting that decision.
Second, there must be a repopulation of the board that existed during the problem — and the bank is about halfway there. The buck always stops with the board, especially when such big-bucks board members — with an average compensation of nearly $400,000 — are supposedly brought in for their expertise and oversight. For example, why didn’t they question Wells' role as the “King of Cross-Sell,” with a ratio more than double the industry average? Again, they and certainly their regulators should have uncovered this scandal rather than having a reporter do it for them.
The third fix is reserved for the most serious situations. A bank whose reputation has been trashed by repeated scandals must change its name and rebrand itself so customers, employees and everyone else realizes it is a totally new bank. If this was a smaller bank, the regulators could have ordered it to be sold, but who is going to buy Wells Fargo? It is not enough to run ads and a PR campaign proclaiming “things are different” and “we’ve learned from our mistakes” — especially when new ones keep surfacing. Wells Fargo’s good name has been tarnished beyond recognition, and it is time to change it and for Wells to rebrand itself into a new bank.
Wells Fargo should have learned this lesson when its predecessor First Union bought CoreStates Bank in 1998. This was First Union’s biggest deal ever, and it took the bank into the Northeast, far from the Southeast where it bought dozens of banks. Unfortunately, it resulted in record customer dissatisfaction and allowed smaller competitors like South Jersey’s Commerce Bank to grow.
Philadelphia is a tough town to please (even Santa Claus learned that when he was booed and pelted with snowballs during an Eagles game). The customer service and merger transition was so poor in Philadelphia that First Union became known to many as the “FU Bank” for the service it provided.
To the credit of First Union’s management, they realized this problem and decided to rebrand the bank. This was done in 2001 when First Union outbid SunTrust for a Winston-Salem bank very few had heard of and no one could pronounce. Purchasing banks normally keep their name, but this was an unusual case where First Union adopted the name of the acquired bank. This was because its own name had become so sullied with bad service that there was no other option but to change it.
Wachovia Bank’s new commitment to customer service resulted in its being ranked No. 1 in customer satisfaction in banking by the University of Michigan for seven consecutive years, a case study in going from worst to best. This would not have been possible without the name change, which not only let customers know this was a new, customer-centric bank, but also motivated employees to provide the best possible service at their new bank.
Of course, management, board members and its biggest stockholder, Warren Buffett, would likely oppose this rebranding recommendation, especially with Wells Fargo’s storied banking history. However, its legendary stagecoach, which has lost its wheels and is stuck in regulatory and bad-PR muck, is being circled by an increasingly large number of hostile and dissatisfied consumer groups, regulators, journalists and especially government officials, including key players in Congress.
In fact, some Democratic presidential hopefuls and influential members of Congress are calling for a breakup of Wells Fargo. While their anger is understandable, it would be better to rebuild a rebranded bank with a new senior management and board team. Sloan stepping down was an important fix — but the bank still has lots of work left to do.