Wells Fargo Wealth Scandal Threatens Its Good Name
To the extent slip-ups and scandals can do lasting damage to big brands, the latest flap at Wells Fargo — this one in its wealth management unit — may be the revered brand’s greatest challenge so far.
The new trouble stems from a defamation lawsuit involving Wells Fargo Advisors, the parent company’s retail brokerage division, and plaintiff Gary Sinderbrand, a broker formerly employed in that business line.
On July 8, in the course of complying with a subpoena from Sinderbrand’s legal team, an outside lawyer working for Wells Fargo emailed a stockpile of data that went well beyond the scope of the original ask.
The lawyer on the receiving end got a 1.4 gigabyte attachment that included “customers’ names and Social Security numbers, paired with financial details like the size of their investment portfolios and the fees the bank charged them,” according to the New York Times.
Sinderbrand tells the newspaper he has data on “at least” 50,000 of Wells Fargo Advisors’ private clients as a result of this “data breach.”
But Wells Fargo spokeswoman Shea Leordeanu tells FA-IQ the trove is likely smaller than that. “We can’t verify that number,” she says. “There’s a lot of duplication just in what we’ve seen so far.”
Leordeanu also objects to the term “data breach.” Says the spokeswoman: “It’s not a data breach. It’s an inadvertent email and none of the material has been disseminated.”
Meanwhile Wells Fargo is taking action in court to get the data returned and to prohibit the unintended recipient from sharing the information any further.
“We take the security and privacy of our customers’ information very seriously,” Wells Fargo says in a canned statement for reporters. “We are continuing to thoroughly investigate this matter and will take all appropriate steps based upon the outcome of our investigation.”
In other words, heads may roll at Well Fargo and, it would seem likely, at Bressler, Amery & Ross, the law firm that mistakenly sent the client-data spreadsheets to Sinderbrand’s lawyer.
As Wells Fargo scrambles to contain the immediate damage by suing to keep its clients’ private information from being shared any further, branding experts say the Wells Fargo brand – one of the oldest in U.S. financial services – has taken a hit it can ill afford.
For Maria Lilly of MJ Lilly Associates, a communications consultancy in New York, Wells Fargo’s latest PR snafu is a stunner.
“How can a firm with such a great reputation – that was really a standard bearer for responsibility before the financial crisis – repeatedly be in the headlines for problems as it relates to its customers?” she wonders.
Lilly is referring to recent scandals that have wracked the bank. The biggest so far — Wells Fargo’s retail bank ginning up a couple of million fake accounts to help employees meet ostensibly unrealistic sales quotas — was uncovered nearly a year ago but still reverberates through the headlines.
Last Friday, the Department of Labor ordered the bank to rehire an employee it fired for raising concerns back in 2011 about the fake accounts and pay the unnamed whistleblower $575,000.
In April the DOL ordered Wells Fargo to reinstate a whistleblower it fired for raising questions about mail and wire fraud at the bank.
Meanwhile, Wells Fargo remains under investigation by local, state and federal authorities, and it juggles a slew of lawsuits related to these shenanigans.
“Something has gone terribly wrong” at Wells Fargo, says Lilly of the litany of scandals. “Whether it’s the leadership or the culture at the bank, I don’t know, but something has definitely gone wrong.”
But Wells Fargo investors seem to be taking the bank’s latest stumble in stride. In intraday trading on Monday, its stock was mildly up in a mildly down day for the S&P 500 and on the high side of its 52-week range.
Still, Lilly thinks its impact could be significant over time, even if its effect isn’t immediate.
“These are very wealthy clients with apparently billions of dollars at Wells Fargo,” she says. “These are highly informed, mobile customers with plenty of choices about where they put their money. If they leave in numbers it could be bad for Well Fargo.”
But Karen Post, another brand maven, thinks Wells Fargo and its wealth unit will weather the latest storm.
“The likeability of banks isn’t very high,” says Post. “But there are barriers to actually switching” — namely in the time and effort it takes to hop firms — that keeps most grumblers in place.
“Consumers have very short memories,” according to Tampa, Fla.-based Post.
“Over and over companies do stupid things,” adds Post. But while consumers may remember these “brand bumps,” they don’t usually hold permanent grudges.
“Long term,” says Post, “unless the stock takes a huge dive the consumer goes on. And it’s just another day dealing with a business run by humans.”
What do you think? Does this new snafu spell trouble for Wells Fargo? Tell us in the comments section, or take our poll here.