Wells Fargo Incentive Structure Leads to Epic Scandal

If you have been reading the financial news lately, you have probably heard about the recent Wells Fargo scandal. Employees of Wells Fargo had an internal goal to sell “at least eight financial products per customer,” according to CNN Money. This led employees to create over 2 million fake credit card and bank accounts without the consent of its customers.


Wells Fargo has taken responsibility for instances when this may have occurred, and it has refunded $2.6 million to customers who were impacted. A larger question still begs to be answered: Are other institutions engaging in this practice? U.S. Senator Susan Collins of Maine and U.S. Senator Claire McCaskill of Missouri have written a joint letter to the Consumer Financial Protection Bureau (CFPB). The letter requests a meeting with the CFPB to discuss whether the agency has investigated the possibility of employees of other financial institutions engaging in a similar practice.


In some of our past blogs, we have discussed how incentives/commissions can impact behavior. Any practice that rewards product sales people to act in their own interests rather than the interests of their clients can have a negative impact. How compensation is received can greatly impact the advice you receive.

This is the danger of working with investment advisors who are not fiduciaries.  A fiduciary is charged with providing advice that is in the best interests of their clients.  As a fee-only financial advisor and fiduciary, I do not receive commissions on any investments that I recommend to my clients.

About Christopher Jones

Christopher Jones is the Founder and President of Sparrow Wealth Management, a fee-only financial planning and investment management firm. Before entering the investment field, Chris was a management consultant for Deloitte Monitor. He graduated summa cum laude from Brigham Young University with a B.S. in Economics and a minor in Business Management.

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