Charlie Scharf, the CEO of Wells Fargo, mentioned at least five times during his lengthy testimony to lawmakers last week that he has been on the job only a few months and he needs more time to fix the bank’s problems.
At one point during his more than four hours in the hot seat, Scharf — who stepped into the CEO post in September last year — was asked by the House Financial Services Committee to speed up Wells Fargo’s response to regulators regarding how the firm is addressing customers wronged by the bank’s past sales practices.
Scharf’s reply: "It’s going to take time because as you know, there are a series of orders that are outstanding, but we’re trying to be as methodical as we can going through piece by piece and managing it in a very different way in a very tight way, just like you would manage any significant project in an institution like Wells Fargo."
Despite his characterization of the length of his tenure so far, Scharf told the lawmakers he believes he has already made a difference.
“I believe the sense of urgency that people are working with inside the company is very different today than it was four months ago. I personally am spending the majority of my time on these [regulatory] issues, easily 75% to 80% of my time, not focused on growth, new businesses, anything like that,” Scharf said.
Scharf didn’t reject the conclusions that the House Financial Services Committee’s Democratic members issued in a report published prior to his testimony — including how the potential for "widespread fraud" remains at bank.
“I’ve been very, very open and honest about our lack of progress, not pointing out the positives, but both being realistic, but also focusing on the negatives because that’s where we can have an impact,” Scharf said.
Asked if the Wells Fargo brand is tainted, Scharf said: “We have not yet re-earned the trust that we would like the Wells Fargo name to represent.”
Scharf explained to the lawmakers his corporate-wide cultural rebuilding plans, noting that compensation — a topic Wells Fargo Advisors FAs tend to show keen interest in — is a key component.
“Changing compensation [and] the way we evaluate people,” are among the changes needed to make the company operate with accountability, Scharf added, noting the risk and customer experience of the staff must be part of that evaluation.
Wells Fargo wants to hire a new head of wealth management as part of a broader restructuring designed to create a flatter organizational structure and provide leaders with clear authority, accountability and responsibility.
Jon Weiss, who’s been leading the company’s wealth and investment management business, is moving into a new position as CEO of the new corporate and investment banking line, which previously formed a part of wholesale banking. Weiss will continue in his role as head of wealth and investment management on an interim basis while Wells Fargo searches for his replacement. No one has been named for the position yet, a spokeswoman confirmed Friday.
Scharf’s predecessor, Tim Sloan, resigned from the CEO post in March 2019, a few weeks after being grilled by lawmakers. Last week, the House committee asked the Department of Justice to investigate if Sloan lied under oath about the company complying with a settlement requiring it to reimburse customers harmed by its abusive sales practices.
In February, Wells Fargo reached a $3 billion settlement with the DOJ and the SEC over the bogus account scandal that has besieged the bank’s brand since the allegations first surfaced in 2016.
In the same month, Wells Fargo Advisors and its independent FiNet unit agreed to pay $35 million to settle allegations of giving bad advice to investors regarding inverse exchange-traded funds. The SEC said the wirehouse and its independent broker-dealer unit failed to properly train staff and supervise sales of such products between 2012 and September 2019.
Wells Fargo employs 13,500 advisors and has around $1.6 trillion in retail brokerage client assets. About 1,000 of those advisors work as independent contractors within FiNet. About $590 billion, or 28%, of client assets sits in fee-based accounts, according to data cited by FA-IQ sister publication Ignites.
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