Wells Fargo keeps struggling to reinvent itself. Starting in 2016, reports surfaced about millions of fraudulent bank accounts being opened by branch employees, who told authorities they were under intense pressure to boost their sales numbers. That was followed by revelations about abuses in its auto lending and mortgage operations.

Despite agreeing to pay billions of dollars to clients and regulators, the bank's woes have continued to generate headlines in major financial news publications.

In the summer of 2023, for example, dozens of complaints were fielded by regulators about new fake bank accounts being mysteriously opened at Wells Fargo. This came some seven years after the first such incidents were reported and despite repeated efforts by Wells Fargo executives to halt such practices. It also raised "fresh questions, experts say, about compliance and risk management at a bank that has been rocked by scandals in recent years," according to Gretchen Morgenson, a veteran NBC News investigative reporter. ¹

A former stockbroker whose reporting of Wall Street won a Pulitzer Prize in 2002, she also uncovered more than 40 new complaints made to the Consumer Financial Protection Bureau concerning bogus accounts being opened at Wells Fargo. That came after the bank had agreed in late 2022 to pay $3.7 billion to "settle CFPB allegations of consumer abuses involving 16 million accounts," Morgenson related.

"Amid the scandals, the Federal Reserve Board, the nation's top financial regulator, took the extraordinary step of capping Wells Fargo's asset size," she pointed out. 

Wells Fargo is still "trying to fix itself," according to the Wall Street Journal. The bank "hasn't been able to shake" the Fed's 2018 order that "handcuffed its ability to grow," Ben Eisen wrote. The paper's veteran banking reporter added Wells Fargo's ongoing woes have meant that a "once prolific buyer of other banks has been cutting staff and shrinking business lines." ²

Turning around such a "big ship," according to the article, can be expected to take time. Meanwhile, the Securities and Exchange Commission revealed that Wells Fargo had agreed to pay back $40 million to thousands of customers for being overcharged on fees related to investment advice. In addition, without admitting any wrongdoing, the bank in late August said it would adhere to a $35 million civil penalty to settle SEC charges. 

Blamed on "internal systems" failures, according to CNBC, Wells Fargo overcharged 10,945 accounts for "many years" through 2022. The report added such accounts had existed since before 2014. A bank spokesperson responded to questions from the news site's Greg Iacurci by noting management had addressed such "process" issues more than a decade ago and Wells Fargo Advisors had "conducted a thorough review of accounts," thus resolving the matter.

But as the longtime personal finance reporter noted in the article: "Studies have shown that many investors are unaware they pay fees for financial services like investment advice or the mutual and exchange-traded funds they own." ³

This isn't the only time Wells Fargo's wealth management business has made headlines. In 2018, the bank's board confirmed reports it had initiated an internal investigation of its wealth management operations. Such coverage highlighted concerns about financial advisors being pressured to move client assets into higher-fee accounts and more risky investments. 

Also, Wells Fargo Advisors agreed last year to pay $7 million to settle charges by the SEC related to anti-money laundering law violations. Regulators had charged the bank with failing to file in a timely manner suspicious activity reports involving client transactions between early 2017 and late 2021, according to the SEC. It was the second time in five years that Wells Fargo Advisors had "fallen short on such requirements," the Charlotte Observer noted. A previous charge by the SEC dating back to 2017 involving filing of suspicious activity reports wound up with Wells Fargo Advisor agreeing to pay $3.5 million to settle such charges. ⁴

The end of Wells Fargo's business and legal issues doesn't appear to be complete, according to the Wall Street Journal and other major financial news publications. At the same time, many regulatory officials and industry professionals argue this story could've had a much different twist if more of the bank's executives had held fast to their core identity as a venerable financial services brand built on trust.

At IFA, which is an independently owned and managed registered investment advisor, we're required to serve as fiduciaries. That means our advisors strive at all times to act in the best interests of our clients — even if doing so goes against the best interests of IFA as a business.

As a result, we're not a broker-dealer and IFA doesn't serve as a custodian for client assets — thereby elminating any conflicts of interest that would be associated with these types of activities. As true fiduciaries for our clients, we also stand ready to lend an expert hand in helping our clients solve a wide range of wealth management issues. 

At the core of our client-centric menu of services is an individually tailored and holistic financial plan. Every IFA client is urged to take advantage of this complementary wealth management process. In short, a comprehensive financial plan is designed to provide our clients with a more reliable road map to reach their financial goals. And armed with such knowledge, we find investors are less likely to fall prey to sales pitches by bankers and brokers — all trying to peddle services that can be fraught with conflicts of interest, higher fees and questionable investment practices. 

Footnotes:

1. NBC News, "Phony bank accounts resurface at Wells Fargo, with a twist," Aug. 4, 2023. 
2. Wall Street Journal, "Wells Fargo Is Still in Fix-It Mode," Sept. 6, 2023. 
3. CNBC, "Wells Fargo repays clients $40 million for excessive investment advice fees," Aug. 25, 2023. 
4. Charlotte Observer, "Wells Fargo Advisors settles SEC anti-money laundering violation charges for $7 million," May 23, 2022. 

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