Tags: wells fargo | texasaver | consumers | public relations

Wells Fargo Gamble Has a Big Cost

Wells Fargo Gamble Has a Big Cost
(Danny Raustadt/Dreamstime.com)

Monday, 05 February 2018 05:19 PM Current | Bio | Archive

Most know that Wells Fargo has had a rough few years.

Most of the devastating Public Relations has been self-inflicted, with decision makers getting caught promoting very bad decisions over and over again. Now, though, Wells Fargo is back in the news yet again.

This time the headlines are the result of the company deciding to escalate the risk in some of its key retirement funds last year. According to Wells Fargo’s plans, the company intends to devote investments to junk bonds, emerging markets, and derivatives. This is quite a shift from previous investment plans for investors looking for solid long-term benefits from safer investments. The idea, of course, is to get more reward, short-term, for a bit more risk.

But at least one major customer didn’t like that strategy. In fact, they disliked it so much, they decided to part ways. That customer, TexaSaver, a supplemental retirement program that accounts for about 240,000 state employees, told the media they were “stunned” by the announced changes. After some back and forth, with the retirement program trying to find a middle ground with Wells Fargo over key disputes, the program opted to sever ties with the bank, a decision that cost Wells Fargo more than $600 million.

A spokesperson for TexaSaver told Reuters that they were surprised and unhappy about the change: “What Wells Fargo wanted to do contradicted why we picked them in the first place… I‘m unhappy with the lack of professionalism at Wells Fargo and how this was conducted.”

And that was just the beginning.

Another group, this one representing 4,000 skilled workers in Colorado, dropped Wells Fargo as well, complaining of the “unproven nature” of Wells Fargo’s proposed change. Wells Fargo, meanwhile, said it didn’t have much of a choice. The investment bank has been taking a beating in the press, and with consumer customers, so it needed to drive up some income from somewhere. The best solution seemed to be increasing investment returns. After all, if consumer customers were aggrieved and aggravated, at least the investment customers would be seeing better returns.

The bank also admits it knew the changes would make some investment groups or programs unhappy, but argue they had to do it. Wells Fargo spokesmen told the media the bank is absolutely committed to the strategy, even though some customers don’t like it.

They believe the strong market encourages a more aggressive approach. Time will tell if investors agree.

Ronn Torossian is one of America’s foremost Public Relations executives as founder/CEO of 5WPR, a leading independent public relations Agency. The firm was honored as PR Firm of the Year by The American Business Awards, and has been named to the Inc. 500 List. Torossian is author of the best-selling "For Immediate Release: Shape Minds, Build Brands, and Deliver Results with Game-Changing Public Relations." For more of Ronn Torossian's reports, Go Here Now.

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Most know that Wells Fargo has had a rough few years.
wells fargo, texasaver, consumers, public relations
Monday, 05 February 2018 05:19 PM
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