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Wells Fargo CFO says reputation issues a challenge for wealth unit
[NEW YORK] Wells Fargo & Co's wealth and investment management unit may be having a harder time generating new business because of damage to the bank's reputation from scandals over its sales practices, chief financial officer John Shrewsberry said on Friday.
"The employees in that area would make the case that its a little harder to compete for new business or to compete head-to-head with other advisers for new business," Mr Shrewsberry said on a call with journalists after the bank reported its second-quarter results. "Just as it was a big tailwind because of Wells Fargo's reputation before that."
He said reputation issues had not hurt profit in the unit, however.
Wells Fargo emerged from the 2007-2009 financial crisis with its reputation relatively unscathed compared to some competitors. But since 2016 it has had to grapple with a phony accounts scandal and other customer abuse issues, including in its wealth management business.
"The reputational issue is something that we have to work hard to help those team members work through," Mr Shrewsberry said.
Wells Fargo's wealth and investment management net income slid 37 per cent in the second quarter from a year earlier, reflecting a US$214 million write-down on the sale of its stake in the RockCreek Group. It took a US$114 million charge to account for refunds to customers in the unit who had been charged incorrectly for certain assets and accounts.
After inquiries from government agencies, Wells Fargo began probing its wealth and investment management division for possible customer abuse, including overcharging and inappropriate referrals.
The unit has been focused on squeezing more revenue out of its advisers by deepening client relationships. Adviser productivity increased 7 per cent in the first quarter from a year earlier, spokeswoman Shea Leordeanu said.
The number of financial advisers at the bank fell 2 per cent to 14,226 in the quarter from a year earlier.
The US Securities and Exchange Commission in June fined the bank US$5.1 million to settle charges Wells Fargo Advisors brokerage had improperly pushed retail customers to actively trade complex investments.