Juggling Dynamite

Our daughter started her first year of university last week.  Talking to her last night she complained that the campus is inundated with representatives from all different banks trying to sign students up for credit.  She said that kids can’t go 100 feet without another sales rep propositioning them in the halls and outside on the grounds.  When our daughter declined, one of the guys said “you’ll be back looking for me in 2 months when your student loans run out.”  Revolting pitch.  It may well work for him, but it’s not in the best interests of inexperienced students (or anyone) to be peppered by credit pushers posing as ‘experts’.

None of this is surprising however, since the banks run pretty much unfettered today.  The revelations at Wells Fargo may be extreme, but they are reflective of an aggressive sales culture that preys on human weakness and financial illiteracy.  This is toxic precisely because the sellers are allowed to market themselves as financial advisors.  This has to end because it is bankrupting our nations.  See Wells Fargo’s questionable cross-selling strategy:

From a bank’s perspective, cross-selling is great because customer acquisition costs are lower, and customers that use more products from a bank are less likely to shop elsewhere.

From a customer’s perspective, buying several products from one bank often means they are not acting in their own best interest by shopping around for the best offers.

In the commoditized market of banking services, the only way to base a growth strategy on cross-selling is to assume that the bank’s employees are master salespeople. It is simply not that hard for individuals to compare credit-card offers and get the best deal.

Cross-selling of banking services has its uses. But as the Wells Fargo fiasco illustrates, institutions that lean on it excessively to drive sales will hit limits. At Wells, a strategic rethink may be needed.

This 2014 documentary is now available on Netflix and iTunes. Given the current epidemic of lying and cheating apparent in our society from sports to business, politics, education and beyond, some context on the behavior is illuminating.

“(Dis)Honesty – The Truth About Lies” is a documentary feature film that explores how and why people lie. The film is anchored in behavioral experiments that measure our propensity to lie – sometimes even unknowingly. On a more personal level, from little white lies to devastating deceits, people share on camera the true stories of lies they’ve told. Experts examine the reasons behind our behavior and the implications of our dishonesty. Behavioral scientist Dan Ariely brings these elements together and guides us in discovering the complicated truths about lies. Here is a direct video link to the trailer.

Speaking of fraud and dishonesty engendered by those in one’s peer group, banking employees have been following their leadership perfectly.  This story is textbook, see Wells Fargo fined $186 million for fraudulently opening client accounts:

For years, Wells Fargo employees secretly issued credit cards without a customer’s consent. They created fake email accounts to sign up customers for online banking services. They set up sham accounts that customers learned about only after they started accumulating fees.

On Thursday, these illegal banking practices cost Wells Fargo $185 million in fines, including a $100 million penalty from the Consumer Financial Protection Bureau, the largest such penalty the agency has issued.

Federal banking regulators said the practices, which date back to 2011, reflected serious flaws in the internal culture and oversight at Wells Fargo, one of the nation’s largest banks. The bank has fired at least 5,300 employees who were involved.

In all, Wells Fargo employees opened roughly 1.5 million bank accounts and applied for 565,000 credit cards that may not have been authorized by customers, the regulators said in a news conference. The bank has 40 million retail customers.

Danielle was a guest today with Jim Goddard on Talk Digital Network talking about recent developments in the world economy and markets.  You can listen to an audio clip of the segment here.