Scandal-plagued Wells Fargo tries to change the subject with new online investment service
Inside Subprime: November 9, 2017
By Alex Huntsberger
After a year that could be charitably called “not great,” embattled banking giant Wells Fargo is launching a new “robo-advising” product aimed at millennial customers. It’s a partially-automated, mostly digital investing service called “Intuitive Investor,” and it’s a bit of an awkward ask given the company’s recently unearthed (and still-ongoing) customer scandals.
The idea behind Intuitive Investor is fairly simple. Wells Fargo is taking the investment services that it already offers and is making them available on a digital platform. Customers are told that all they need to do is answer eight questions and they will be matched with an investment portfolio that matches their profile.
The service is fairly affordable as far as fees go. The advisory fees are .50 percent and the fees for the funds themselves – there are nine options in total – vary from .14 to .18 percent of assets. Managing your investment can be done digitally, but there are customer service representatives available if you have questions.
Sounds good so far, right?
Well, there are still a couple of issues. First of all, setting up a portfolio with Intuitive Investor requires a minimum of $10,000 in assets. (Cut to millions of millennials guffawing and spitting La Croix all over the place.) That number is going to put a pretty hard cap on who can sign up for the service. Remember, this is a country where six in 10 Americans don’t even have $500 in savings.
And then there’s the problem of the company offering the service in the first place: Wells Fargo. At this point, a walk down memory lane for them might as well take place on Purge night.
The company’s primary scandal was revealed back in September of last year, when the Consumer Financial Protection Bureau (CFPB) fined them $185 million dollars over a five-year long scam that saw aggressive sales quotas lead to employees creating unauthorized customer accounts – ones that came with very real fees – in order to meet their numbers.
The scandal cost a number of top executives their jobs, including CEO John Stumpf and Carrie Tolstedt, head of the company’s retail division. Don’t cry for Stumpf though, he got a $133 million retirement package.
In 2017, Wells Fargo saw even more scandals hit the press. They were sued by a group of Latino borrowers in California over alleged racial discrimination; they fired even more managers with ties to the fake accounts; they were sued in Philadelphia for targeting minority customers for bad loans; they were accused of making improper changes to customers’ mortgage contracts; they admitted signing up over 570,000 borrowers for car insurance that they didn’t need; and paid $108 million to settle a lawsuit alleging that they overcharged veterans through a federal mortgage refinancing program.
And that’s not even all of their scandals! If you wanna read about all of them, you can check out our updated scandal timeline.
Given all that, would it be a surprise is customers didn’t trust Wells Fargo and its new fleet of “robo-advisors” to handle their investments?
We know that was a rhetorical question, but we’re going to answer it anyway: No, it wouldn’t not be surprising at all.
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