Analyst Dumps Wells Fargo for Bad Service, Upgrades Its Stock to a Buy

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Wells Fargo Bank
Many Americans -- this writer included -- have had the experience of being treated shabbily by their bank. But most of us, when confronted by mysterious fees or deceptive marketing practices, have little recourse beyond closing our accounts and taking our (admittedly modest) business elsewhere.

Not so Richard X. Bove, disgruntled Wells Fargo (WFC) customer and influential bank analyst. When Bove finally got fed up with his treatment at the hands of a Wells branch in Tampa, he not only moved his money to JPMorgan Chase (JPM), he turned his experience into a research note.

But Bove's report was a highly counter-intuitive response. It wasn't a scathing indictment of Wells's indifference to customer satisfaction; instead, it suggested that too much attention to the concerns of account holders like him might actually hinder a bank's pursuit of profit. The New York Times reports: "What really matters, [Bove] now believes, is pushing products and managing risk."

Which explains why, around the same time he switched to Chase -- where he says he enjoys the level of service he used to get from Wachovia, which Wells bought in 2008 -- Bove upgraded his recommendation on Wells Fargo stock to a buy.

Says Bove: "I'm struck by the fact that the service is so bad, and yet the company is so good. Whatever it is that drives people to do business with a given bank, in my mind, now has to be rethought."

Indeed, the story of Wells since its purchase of Wachovia suggests that customer satisfaction and success with investors are not necessarily linked. The Times notes that Wells recently passed JPMorgan Chase to become the country's biggest bank by stock market capitalization; at the same time, J.D. Power & Associates gave Wells below-average customer service ratings in seven out of the 11 regions where it does its surveys.

"In Florida," says the Times, "where Mr. Bove lives, Wells was 10th out of 11th banks." So he probably wasn't imagining the slights.

FierceFinance asks the obvious question: "So who does a bank serve, its shareholders or its customers?"

The knee-jerk answer is both, but few would doubt that there's a trade-off in these days of limited resources. The best line of action might be to do just enough for customers to keep revenue at levels that will ultimately please shareholders. You don't want to spark a mass defection, but you don't want to spend unnecessarily on keeping retail customers happy.

Wells, of course, denies any deliberate lack of attention to retail customers, but Bove seems to believe that things might be different behind the scenes: "Spending time solving problems with people is not selling products," he said. "It's wasting time."


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22 Comments

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boulderrita

Just to let you know i did the exact same thing years ago. I also sold the stock i had. Probably not a good idea!

December 31 2012 at 4:50 PM Report abuse rate up rate down Reply
playmaker86

Wellsfargo is simply unethical. Were you aware that free mobile apps & free online services actually charge fees to transfer money between TWO wachovia acounts. The fee is $15.00. I am outraged at this unethical business code wells fargo carries. So when you actually take time to contact them about a problem, you are sent long drawn out computer responses with random names plugged in the blanks from pre written emails. The wellsfargo computer program that has taken someones job by the way, basically explained that fees can be charged whenever they feel necessary. Look, this horrible company is most likely one of main the reason we have reached this recession to begin with. They over allowed with loans, charged fees to the middle class, and issued balloon leases that people couldnt afford. They deserve to go bankrupt and let others compete. wells fargo is a fraudulent company that deserves to go bankrupt. Simple.

October 20 2012 at 11:47 AM Report abuse rate up rate down Reply
crimeslawyer

The company puts pressure on its bankers to sell products. The bankers in turn will tell the customer just about anything to get them to switch their money into other types of accounts.

July 26 2012 at 7:15 PM Report abuse rate up rate down Reply
lmaar2

They are just as bad to their business customers. We've been trying for 5 months to get them to stop pulling our loan payment out of the wrong account, an account I might add, that is completely unrelated to the company with the loan. Different owners, different name, different account numbers, everything. They said we had to sign paperwork to give them permission to stop taking the money out of the wrong account and start taking it out of the right one--and it still isn't fixed. The analyst can say what he wants, if we didn't have a loan with WF, we would switch banks and everyone knows what a hassle it is for a business to switch banks. Who are they going to "push products" to when everyone LEAVES?

July 26 2012 at 1:45 PM Report abuse +1 rate up rate down Reply
txblueslover

It's not just banks that are abandoning customer service ... everyone I do business with on a daily basis gives customers the short shrift when it comes to dealing with customer problems. High on the list is IVRU systems, which never seem to have the option available to resolve a problem, but plenty of options on how to pay your bill by phone or online or get account information. None give you the option of selecting a human to deal with, unless you press the 0 button or *0 or #0 till you hit the right combination and get switched to a service rep, usually after an interminable wait, to whom you have to repeat all the information you just keyed in to the automated system from your phone. To today's companies, the best customer service is provided when the customer solves all their own problems without any intervention by the company.

July 26 2012 at 1:25 PM Report abuse +1 rate up rate down Reply
cobaltmuscle

It is a sad time in this country to see so many losing their homes and investments and be treated poorly by the very institutions that are responsible to begin with!! It is even sadder that our government is watching this happen. Yet they cannot understand on how to kick start the economy?? Wells Fargo is HORRIFIC!!!! They are in and out of my accounts more than I am. They have made a travesty out of banking!!!!! Fake customer service!!
DUMP WELLS FARGO!!!

July 26 2012 at 1:10 PM Report abuse +2 rate up rate down Reply
John

Business is about making money, no matter how it is done. This approach has given us our efficient, productive, wealth-sharing, happiness-producing modern American capitalist economy as explained by America's social conscience, Larry Kudlow, who often welcomes Dick Bove to add luster to how TV ideology show.

July 26 2012 at 12:51 PM Report abuse -1 rate up rate down Reply
arcticshade

i don't see the point of moving money from one criminal bank to another. Go to credit unions people. I know some of you worry about the lack of ATM's for credit unions. They have a huge list of them. Just check with them to find out. Don't deal with these crony capilastic theives that took down the world economy and constantly bribe our gov't with donations and lobbist. No one should have control of gov't and it's choices.

July 26 2012 at 12:45 PM Report abuse +1 rate up rate down Reply
dbwbwarren

I am not sure how anyone can argue that bad service is good business. This is another sign that Wall Street is very disconnected from the rest of the US.

July 26 2012 at 12:41 PM Report abuse +3 rate up rate down Reply
GERANNIE

Yes, I have my stock account at Welle Fargo and called them yesterday in the morning because my Husband passed away and I wanted to know how to go about removing his name. My broker said his assistant would call me back. I called at 9 AM and at 3 PM I hade to call them. Some service, nice how they treat a greving widow.

July 26 2012 at 12:24 PM Report abuse +2 rate up rate down Reply