Wells Fargo PR firm Sard Verbinnen Should Be Fired For Advice Given to CEO Stumpf. Period. And Stumpf Needs to Quit. Duh.
This blogger typically doesn’t call out peers within the industry, but gee whiz, and to paraphrase Donald Trump “What the Hell Were Those Idiots Thinking?!” with respect to Wells Fargo’s PR Firm ‘counsel’ to CEO John Stumpf when the Wells Fargo stage coach carrying the brand of the Number 2 U.S. bank went flying off the trail three weeks ago. That was when Wells agreed to pay a $185mil fine for un-fiduciary-like practices i.e. ‘cross-selling’ products not needed by customers, and charging them fees along the way. Now, one of the most iconic retail bank brands looks more like a train wreck (apologies to NJ Transit and to those injured in this morning’s Hoboken line commuters for the euphemism).
Perhaps NYSE:WFC is not as big a wreck as Germany’s Deutsche Bank brand (NYSE: DB) has become; DB has lost 75% of its share value in the past year. But, the fact is that Wells Fargo PR gurus have stumbled egregiously since the first week of Sept news broke. Either Stumpf is dismissing Sard Verbinnen’s counsel within the context of PR Crisis Management 101, or Stumpf likens himself to The Donald and has eschewed any professional recommendations as to how to communicate with the media, and more importantly, how to communicate with congressional spear fishers who, during live cable tv broadcast, have turned Stumpf into a poster boy for bank industry malfeasance. Worse still and along the way, Stumpf has, all by himself, managed to burn the bank’s long-established brand image into what is closer to that of a toasted marshmallow.
Obviously, Stumpf should fall on a sword and quit before the Board should be obliged to terminate him without a severance package. Then again, Stumpf has stacked the board with cronies (a tempting, but ill-advised corporate leadership strategy), so it remains to be seen who remains at Wells that would suggest, no less vote for Stumpf’s dismissal. But barring a Board directive, Mr. Stumpf should do the right thing for himself by doing the right thing by shareholders and take his bat and ball and go home.
Burnish a Brand, or Burn A Brand? Stumpf is Stumped…
During the ensuing two appearances before Congress and the House Financial Services Committee (last week and today), Wells Fargo Chair and CEO John Stumpf repeatedly stuttered (ok, maybe he should see a speech pathologist) and appeared totally stumped when asked (under oath) among other questions, i. when he learned of the ‘scandal’, ii. what steps he took to address it? iii. whether anyone (senior) other than 5300 low paid employees were fired for the calamity? and iii. the best question posed “..Can you tell me your understanding of whether other banks conduct cross-selling of products?” Stumpf responded with a bald-faced lie. That said, House members exploited their extended appearances via CNBC coverage to introduce questions and comments that were completely unrelated, totally self-serving and strictly for grand standing. But that’s the Congress you voted for!
For financial industry marketers, or global brand messaging gurus who might have been asleep, three weeks ago was when mainstream media [finally] got the memo that, during a period extending as far back as 2009 Wells Fargo was aggressively up-selling aka ‘cross-selling” customers with un-needed products (credit cards and other products the customers did not need), and more often apparently, without even their knowledge or permission. $12/hour employees of the bank who were purportedly under pressure from regional managers (with the knowledge of more senior executives) to meet quotas created 2 million phony customer accounts in order to boost a widely-followed bank industry metric, number of bank products/services per customer.
The news media got wind of the story after Wells Fargo announced it had agreed to pay a $185mil fine for creating phony accounts that cost customers less than $2million in fees. Yes, that’s a whopper of a settlement given the erroneous costs incurred by the customers of Wells, but regulators were seeking retribution from senior management (and indirectly Wells shareholders), many of the former earned big bonuses for improving the metrics widely-followed by financial industry analysts. The industry wide average i.e. number of accounts per customer is close to 3.1, and Chairman/CEO Stumpf repeatedly promoted to industry research analysts his multi-year strategy that targeted 8 accounts per customer, a target nearly 2 1/2 higher than industry competitors. As those numbers increased in each of the past 5 years, institutional investors bid up Wells Fargo share price by nearly 250%, leading to a $200mil gain in shares held by Stumpf alone.
When grilled by the assortment of Congress members last week and today, Stumpf repeatedly pointed to the firing of 5300 bad apples, he admitted that no senior executives had been fired or even reprimanded for their failure to oversee their divisions properly and he claimed he was “not familiar with competing banks’ cross-sell strategies or their metrics.” That last comment wreaks of perjury while under oath given 12 quarterly conference calls with industry analysts in which cross-sell was framed as their best metric when compared to other retail banks. OK, lying to Congress is an art and not a science..ManyPeopleAreSaying that Democratic Presidential hopeful Hilary Clinton has done the same within the context of her email scandal, but we digress..
Cross-Selling is a ubiquitous sales/marketing tactic that is used across nearly every industry and by every company that offers more than one product. Within the financial services space, offering a customer/client a product or service that complements a respective product they currently have is a critical component of every business model. Cable TV providers always cross-sell by continuously offering upgrades or additional packages. Famous brand sportswear makers that sell sneakers upsell socks. Insurance companies cross-sell home insurance with life insurance and/or auto insurance products. Technology companies that sell hardware promote software products. Advertisers who buy print media are pushed on buying digital media placements by their ad agencies. Car manufacturers peddle extended warranties and often unnecessary service agreements. The list goes on and on. Lawyers sell estate planning services after you’ve become a captive tax strategy client.
Cross-selling is therefore the business world’s oldest strategy. Wells Fargo’s Stumpf stumbled BIG TIME by not being having his narrative squared away in advance of the pelting by Congress. He could barely explain what cross-selling is in the simplest of terms (as per above), and when challenged as to the efficacy of that practice, he looked like a deer facing the headlights of an oncoming 18 wheeler.
One might say that Stumpf’s recent performance in terms of properly defending the multi-industry practice of cross-selling rated an F. Then again, it would seem Wells Fargo et al also gets an “F” for Meeting Fiduciary Obligations. They are a bank, and they do have a fiduciary obligation to protect customer best interests. The multiple class-action law suits against Wells that are quickly winding their way through various venues will leverage Stumpf’s nearly-narcissistic behavior and when the dust settles, Wells’ will likely find themselves paying as much as billions of dollars to regulators and perhaps aggrieved customers. Shareholders who own stock in WFC will continue to suffer until a clean sweep is made across the upper echelon of WFC management, if they continue to hold the stock as the story unfolds.
Who to blame: The PR Firm that is supposedly advising the Wells Fargo Board of Directors. Oh, that Board is led by a fellow named Stumpf, who has effectively said he was completely unaware of there being any problems related to cross-selling. Stumpf should resign immediately, simply because there is nobody on the Wells board who would propose firing him.) Wells Fargo PR firm Sard Verbinnen Should Be Fired, Period. If you are a corporate honcho and would like to know best practices for how to get in front of the wave instead of being pulled down by it, we’re happy to provide a courtesy consultation. Wells Fargo PR Firm Should Be Fired; Stumpf Stumped Testifying