How Wells Fargo’s High-Pressure Sales Culture Spiraled Out of Control

Hourly targets, fear of being fired and bonuses kept employees selling even when the bank began cracking down on abuses; ‘not a team player’

By Emily Glazer

Sept. 16, 2016 3:10 p.m. ET

At a sales meeting in Florida in 2014, Wells Fargo & Co. regional executives scolded lower-level managers about an obvious problem that kept cropping up at the bank. Managers were told that their employees should never open accounts for people who don’t exist, people familiar with the meeting recall.

One manager in the room saw things differently. In an email peppered with exclamation points and capital letters, she urged her employees to ignore the bosses and get sales up at any cost, says someone who saw the email.

For more than 15 years, selling more products to customers has been a driving force of the San Francisco company. The term “cross-sell” appears 20 times in the latest annual report by Wells Fargo, which calls its branches “stores” and has the highest return on equity of any large U.S. bank.

The sales culture rooted itself so deeply among employees in Wells Fargo branches that it eventually spiraled out of control. Federal regulators and the Los Angeles City Attorney’s office announced last week that Wells Fargo opened as many as two million deposit and credit-card accounts without customers’ knowledge. The problems affected most of the product types sold in the bank’s 6,000 branches, but few of the accounts made money because customers rarely used them.

“If you could sell, you had a job,” says Scott Trainor, who worked at Wells Fargo in several different jobs until he quit in 2014. He says he was fed up with sales pressure and unethical practices. Managers suggested to employees that they hunt for sales prospects at bus stops and retirement homes, according to Mr. Trainor and other former Wells Fargo employees.

John Stumpf, Wells Fargo’s chairman and chief executive, denies that the company’s culture is obsessed with nonstop selling that ran amok. “Could we have done more, faster, better? Of course,” he says. Mr. Stumpf says he “feels accountable” but adds that some employees didn’t honor the bank’s values.

The scandal mars the reputation of a bank so renowned for its sales prowess that rivals have long tried to emulate it. Large banks have become far more sales-conscious in hopes of squeezing additional revenue from customers.

The mess at Wells Fargo isn’t likely to change that. The bank said this week it will make major changes to its incentive system but won’t back away from cross-selling.

Wells Fargo declined to comment on current and former employees’ descriptions of sales practices at the bank. “We never want a customer to receive a product they do not want or value,” spokeswoman Mary Eshet said Friday. “We are committed to fixing this issue, to strengthening our culture throughout the company and taking the necessary actions to begin restoring our customer’s trust.”

For five years, Wells Fargo conducted investigations into improper practices, hired consultants and tinkered with sales and compensation incentives. Its efforts typically focused on specific offices and regions, but some employees say they got mixed signals, including at the Florida sales meeting in 2014.

The manager who encouraged subordinates to defy their superiors was fired in a crackdown that cost about 5,300 employees their jobs over five years, according to a person familiar with the matter.

The firings were disclosed last week when Wells Fargo was fined $185 million for what regulators called “widespread illegal” sales practices. The bank neither admitted nor denied the allegations.

Questionable sales tactics persisted, though, and were an open secret in Wells Fargo branches across the country, according to interviews with more than three dozen current and former area presidents, district managers, branch managers and other bank employees.

They say many branch managers routinely monitored employees’ progress toward meeting sales goals, sometimes hourly, and sales numbers at the branch level were reported to higher-ranking managers as many as seven times a day. Tension about how to meet the sales targets was common.

“If somebody said: ‘This doesn’t make sense. Where are you getting these sales goals?’ then [the response] was: ‘No, you can do it’ or ‘You’re negative’ or ‘Oh, you’re not a team player,’” says Ruth Landaverde, a former Wells Fargo credit manager in Palmdale, Calif.

She says she often got the same response whenever she said a customer didn’t need another credit card. “The answer was: ‘Yes, they do,’” she says. She quit after being warned she wasn’t reaching her sales goals, she says.

Employees at a Wells Fargo branch in Lincoln, Neb., had a daily goal to open two new checking accounts and make eight other product sales, says Steven Schrodt, who worked there from 2010 to 2012.

Managers asked employees who had fallen short of the targets if they could open accounts for their mother, siblings or friends, according to Mr. Schrodt and other former employees. He says he opened about 15 accounts for friends and family members. Mr. Schrodt says he decided to leave Wells Fargo because the sales pressure was too stressful. He is now in law school.

Bankers in branches who hit sales targets could earn bonuses of $500 to $2,000 per quarter, while district managers could get $10,000 to $20,000 a year, according to six Wells Fargo employees.

Bonuses made a big difference in the paychecks of branch employees, whose base salaries often were about $30,000 a year. According to the bank, tellers are paid $12 to $16.50 an hour, depending on location and experience.

In Tucson, Ariz., some bankers met sales goals by using a list of wealthier, existing customers who were preselected for credit cards, according to a banker who was fired last year for what the bank called unethical behavior.

The customers were told in phone calls that Wells Fargo planned to send them a new credit card as a “thank you” for their business. If a customer didn’t want the card, he was told to cut the card when it arrived in the mail, according to the former banker.

She says those customers weren’t told that issuing each new card required a credit check, which can lower a person’s credit score.

At the end of last year, the average Wells Fargo retail customer had 6.3 products, according to the company. Inside the bank, cross-selling was the brainchild of Mr. Stumpf’s predecessor, Richard Kovacevich, when he led Norwest Corp., which merged with Wells Fargo in 1998.

Mr. Kovacevich wasn’t aware of any cross-selling problems before he retired as CEO in 2007 or left Wells Fargo’s board of directors at the end of 2009, according to a person familiar with the matter.

In the 2010 annual report, Mr. Stumpf said he often was asked why Wells Fargo had set a cross-selling goal of eight. “The answer is, it rhymed with ‘great,’ he wrote. “Perhaps our new cheer should be: ‘Let’s go again, for ten!’

Former branch manager Rasheeda Kamar says her Wells Fargo office in New Milford, N.J., had a goal of selling about 15 new products or services a day. If the branch didn’t hit the goal, the shortfall would be added to the next day’s goal, she says.

Ms. Kamar says laggards were threatened with termination and sometimes criticized in conference calls. In February 2011, she wrote to Mr. Stumpf in an email: “For the most part funds are moved to new accounts to ‘show’ growth when in actuality there is no net gain to the company’s deposit base.” She says she got no reply.

After working for Wells Fargo and its predecessor banks for 22 years, she was let go in 2011 for failing to meet sales targets, she says.

The high-pressure sales environment defied the bank’s official policy. A 2007 internal document titled “Sales Quality Manual” said customer consent “for each specific solution or service is required every time (including each product in a package).”

The document also said “splitting a customer deposit and opening multiple accounts for the purpose of increasing potential Incentive Compensation (IC) is considered a sales integrity violation.”

Despite the warnings, some bank executives noticed around 2009 and 2010 an uptick in bad sales behavior, according to people familiar with the matter. They noticed a rise in activity when the bank was running its “Jump into January” sales program, which set big goals in a month that usually was slow.

About a year later, employee-satisfaction surveys done for Wells Fargo by research firm Q & A Research Inc. showed that some bank employees felt uncomfortable about what managers had asked them to do or when pushing customers to buy products, says Shannon Purvis, who reviewed some of the surveys while working at Q & A. She no longer works there. The research firm’s chief executive, Warren Pino, says its findings are confidential.

In 2012, Wells Fargo’s community-banking unit assembled a special task force to look for suspicious patterns in sales practices and examine areas of the U.S. where customer complaints were prevalent, such as Southern California, according to current and former bank executives.

A former Wells Fargo human-resources executive says the review found that a local management team in the Los Angeles area was “very aggressive” in the use of questionable tactics to do better on sales goals.

In early 2013, Wells Fargo fired about 200 employees. The firings rattled some directors and executives who worked in other parts of the country. Some executives wondered if sales goals were too high or if cross-selling was an underlying problem, the former human-resources executive says.

The conclusion was no. “When we first started looking at it, we didn’t think it was anything other than rogue junior players and a few rogue managers,” says someone involved in the bank’s internal discussions.
Nevertheless, the community-banking unit’s risk-management team increased its oversight and audit capabilities. Wells Fargo also changed parts of the compensation structure.

“We were making changes as quickly as we could, as incrementally as we could, without blowing things up,” one Wells Fargo executive says.

In December 2013, the Los Angeles Times reported questionable sales practices at Wells Fargo offices in Southern California. Los Angeles City Attorney Michael Feuer launched an investigation, and the Office of the Comptroller of the Currency asked the bank to hire consultants to dig deeper.

Wells Fargo hired consulting firm Accenture and law firm Skadden, Arps, Slate, Meagher & Flom LLP to conduct an internal investigation, and Wells Fargo’s board was briefed regularly about the investigation’s progress, according to people familiar with the matter.

As a result, the bank lowered some sales goals and toughened procedures to ensure that new accounts were legitimate. At regional sales meetings, executives stressed the need to make sales properly.

Despite the edicts, the daily routine and pressure to drum up sales in branches didn’t change much, says Randy Holbrook, a personal banker who worked at two Wells Fargo branches in Florida from 2012 to earlier this year.

“Every day around 3 p.m., all the personal bankers were looking at each other and saying: ‘Who are you going to call?’” he says. Mr. Holbrook says missing targets meant working extra hours when the branch was closed to make more calls.

In weeks when the office was closed for a holiday, all of the bankers would have to come in Saturday, Mr. Holbrook says. He says the branch manager shut off his access to the internet when she saw him looking at a sports website instead of hunting for customers. He says the sales pressure caused him to quit.

Higher-ranking executives didn’t realize how much their strategic planning and goals were based on exaggerated numbers, according to people familiar with the matter. A Wells Fargo executive says the person in charge of creating a yearly sales plan for the community-banking unit “had no idea of what was real and what wasn’t in the prior year’s performance.”

In May 2015, the Los Angeles city attorney’s office alleged in a lawsuit that Wells Fargo pressured retail employees to commit fraud. The allegations included opening accounts for people who didn’t exist and charging customers for products without permission. Wells Fargo said it would defend itself.

Wells Fargo hired consulting firm PricewaterhouseCoopers to do an in-depth analysis. About a dozen PwC employees worked on the project for about a year, discovering fraudulent sales practices that were prominent in Phoenix, Miami and Newark, N.J.

Throughout last year, the Consumer Financial Protection Bureau and OCC kept pressing the bank for answers. Earlier this year, Wells Fargo’s top executives and directors were told that the number of employee firings added up to 5,300. The firings peaked in 2013.

“We knew we had problems [and] knew investigations were going on, but we didn’t know it was that many people,” says one person familiar with the matter. “How did this get this far?”

The fired Wells Fargo employees include personal bankers, branch managers, district managers overseeing about a dozen branches each and area presidents overseeing regions. It isn’t clear if any higher-ranking executives were fired or implicated in the sales scandal.

Earlier this year, retail-banking chief Carrie Tolstedt told Mr. Stumpf that she planned to retire after 27 years at Wells Fargo and Norwest. He didn’t object, and Wells Fargo made it clear to regulators that she would be leaving, according to people familiar with the matter. Her retirement was announced in July. She didn’t respond to requests for comment.

The bank said Tuesday it will scrap all product-based sales goals in its retail branches starting Jan. 1, but Mr. Stumpf remains steadfastly committed to cross-selling. “That’s how we’ve grown so much,” he says.

—Christina Rexrode, AnnaMaria Andriotis and Jim Oberman contributed to this article.