Why the banks are not, nor ever will be, your friend
When I was a kid, I remember my parents taking me to the local bank to open up a savings account. In those days, I got a little ledger book. Every time I made a deposit, we'd mark it down in my ledger with the date, as well as the total savings. I remember the bankers being very nice, and it felt like they were on your side.
Today, the banks still love to help parents open accounts. They'll even do "generous" things like waive the maintenance fee on accounts below a minimum threshold to get kids money in their coffers. Some banks even have whole programs built to attract kids to open up accounts.
Why? Because when you start 'em young, you can train 'em young.
Your friendly, neighborhood banker?
Banks work very hard at creating a friendly, good-guy persona. But the reality is they're more like greedy leeches than they are good neighbors. And as if charging fees for pretty much everything related to them making money off your money, they also profit big time from selling you financial products.
And when the pressure to sell those products gets too strong, bad things happen to the little guy.
Enter the latest scandal from a big bank, this time Wells Fargo. As The Washington Post reported, "Subject to aggressive sales goals, some two million accounts opened by Wells Fargo workers may have been unauthorized, created without customers' knowledge and 'often racking up fees or other charges,' according to the Consumer Financial Protection Bureau."
Why would they do this?
You want me to do what?
"An investigation by the Los Angeles Times into the sales practices back in 2013 reported that branch managers had to commit to 120 percent of daily numbers and tellers had to come up with at least 100 sales of financial services per quarter. Aggressive sales goals are frequently cited in anonymous employee reviews on Glassdoor.com, a career web site."
People do strange things when they are afraid of losing their jobs. And fear of not hitting sales goals cost some 5,300 employees their job at Wells Fargo, as well as the institution itself a $185 million fine.
Lets you think this is an isolated incident, Jim Pearce, a 30-year veteran in the banking industry writes in Investing Daily: "The scale of the malfeasance was impressive, but I wasn't surprised it happened, given how prevalent this form of compensation has become throughout the entire banking sector. I spent over half of my 30-year career working in the investment departments of several banks, every one of which pressured their branch personnel in similar ways as Wells to sell loans, credit cards and other high margin products."
Pearce continues, "In all these cases the senior management team either knew, or should have known, about the problem long before regulators levies severe fines and other sanctions."
In this case, Wells Fargo executive Carrie Tolstedt, who was in charge of the division that opened all these fraudulent cases, gets to "retire" with a giant bonus to the tune of $124.6 million, as well as the praise of Wells Fargo's CEO John Stumpf , who said she "a standard-bearer of our culture" and "a champion for our customers."
If that's the case, I'd hate to see what the bad apples look like at Wells Fargo.
Par for the banking course
Of course, none of this should be surprising news to those who have paid attention to the banking industry over the last decade or more. I've written plenty about other bank scandals, such as Barclays manipulating LIBOR in 2012. As I wrote then, "Barclays has tried to sweep this incident under the rug by settling with British and U.S. authorities to the sum of $453 million. But this scandal is only growing." Of course, today, you'd be hard pressed if the average person remembered or even knew about this.
Most likely, people will forget about this Wells Fargo scandal in another four years time.
All this should come as no surprise. As I also wrote, "Money may not be everything, but it is important. Integrity, on the other hand, is everything. And money is a great barometer of people's integrity. When a lot of money is on the line, people will start to do unexpected things. Money often reveals who we really are."
Money has revealed the banks for what they are: greedy institutions that will do anything to get more of your money, even lie, cheat, and steal.
Yet, billions of people hand their money over to them each day.
How's that knife in your back feel?
It reminds me of the famous line from Shakespeare's "Julius Caesar." As Caesar is being stabbed to death by the Roman Senate, he looks at his "friend" Brutus, and proclaims, "Et tu, Brute?"
So, what's the moral of the story?
Banks never have, and never will have, your best interest in mind-but they want you to think that way. They want you to believe they are your friends. Just take a look at their advertising.
Rather, they are institutions made to sell financial products like loans, credit cards, mutual funds, and more. Their financial advisors are not advisors at all. They are salespeople. And like Brutus, they will stab you in the back when they get the chance.
It's time to up your financial education
Today, more than ever, it pays to know that the financial cards are often stacked against you. And it pays even more to know how to play the game of money on your own.
Today, more than ever, you must increase your financial intelligence. If you don't, you'll be sold down the river before you know it by a banker with a smile and his fingers crossed.
And never, never forget that the banks are not your friends.