There's a fine line between a brand that's battered but salvageable and one that's disfigured beyond repair, and Wells Fargo is straddling it. Last year's phony account scandal has taken a huge, if unsurprising toll on the bank's retail unit, but it's the damage to other divisions that suggests the poison might not be localized to those parts of the business directly responsible for the shenanigans.
In the latest indication of ill will creeping across the entire breadth of Wells Fargo's brand, Reuters reports that the bank's fund management business has taken a hit right in the solar plexus from pension fund managers, who are apparently questioning the wisdom of investing with a bank that fired untold numbers of bankers because they refused to commit fraud.
It is difficult to determine the scandal's precise business impact. Like other fund managers, Wells Fargo is grappling with the seismic shift of money into funds that track indices. Even before the scandal erupted investors had been pulling money out of its funds. Yet its fund unit has seen faster outflows than its peers and the withdrawals accelerated in the last quarter of 2016.
Wells Fargo's core mutual funds business, for example, had the biggest market share decline among large U.S. fund families in 2016, according to Morningstar Inc data. In December alone, the funds recorded $7.1 billion in net withdrawals, two and a half times more than second-worst performer.
Needless to say, Wells Fargo rejects the idea that its recent contretemps has anything to do with massive outflows from its fund management business (which, we might add, lies well outside Wells' wheelhouse). But at least some of the nation's humble pension fund managers beg to differ:
The bank's $482 billion asset management arm was among three finalists to run a $40 million bond portfolio for Oakland's police and fire pension fund last fall. The contract went to a firm with 17 employees and $1.5 billion in assets and David Sancewich, a consultant who helped the pension fund with the selection, told Reuters the scandal influenced Oakland's choice. "It was one variable as part of the decision process," he said in an email.
When you're losing cred even among provincial pension plan managers, by custom the least informed and most credulous players in finance, it's time for a big rethink.
On one hand, you have to feel bad for the Wells Fargo fund managers whose jobs have about as little to do with the retail banking responsible for their misery as they do with driving stagecoaches. But one of the big upshots from the Wells Fargo mess is that it was not just a few bad apples but a whole rotten culture, maintained through malign incentives, that made such an eye-popping scandal possible. And if culture is the problem, it's likely not going to be confined to one office.
And it hasn't helped that Wells Fargo has followed up its big stumble with a series of own-goals each more clumsy and embarrassing than the last: bombing its living will test, failing the heretofore unfailable community lending review, etc. It might be unfair to chalk up all these boners to the same bad tendencies that enabled the account fiasco, but they certainly don't inspire confidence in a management team working overtime to regain trust.
So, 165 years from its founding, it might be time to consider a Wells Fargo rebrand. We have a few ideas.
- Hank and Bill's. Borrowing a page from the Book of Lloyd, Wells might reach back to its 1852 founding and label itself with the first names, rather than the surnames, of its illustrious progenitors. Such a rebrand would not only re-emphasize the main-street approachability that Wells has long sought after, but might also play well with millennial hipsters accustomed to cloying compound business names.
- Stagecoach. Though it's been a historical anachronism for close to a century, the quaint logo might have some emotional resonance for executives pining for a time beyond the recollection of any living person.
- We're Sorry Bancorp. Since apologies seem to be Wells' largest area of growth in the past year, it would save some time to just get that sentiment out front.
- Bank of San Francisco. It's easy to forget that Wells Fargo is headquartered in a tech capital synonymous with unrelenting innovation and sleek robotic cool. Although those traits are basically antithetical to the bank's current branding, it can't hurt to do a 180 given how things are going right now.
- Sloan's Loans. No explanation necessary.