The Wells Fargo sales scandal was a disaster on multiple fronts. The financial services behemoth agreed to pay a $185 million fine after being caught opening more than two million accounts, without customer knowledge, in order to reach sales goals. Recently, Wells Fargo executives announced that they expected to spend tens of millions more navigating post-scandal investigations and other regulatory issues.
Yet the monetary penalties, while substantial, may ultimately be less damaging than the reputational cost. The problems caused by the behavior of a group of employees in one division of the firm could cause prospective clients to sour on Wells Fargo as a whole. It could be years before the company recoups the public goodwill it ceded as a result of the controversy.
So what lessons can be drawn from this debacle? Let’s take a closer look.
The value of a transparent approach
Nothing severs the bond of trust between a customer and an institution faster than dishonesty. Wells Fargo, for example, faces years of painstaking work to repair that breach.
The better option is, as always, practice full transparency. One example: Customers often misunderstand or fail to investigate the basic features of their accounts. Then, when something like an overdraft fee occurs, this informational vacuum creates hard feelings. Customers who aren’t expecting to be assessed a fee will naturally react differently from those who know the penalties attached to such an action.
In today’s always-on, 24/7 digital world, those hard feelings can quickly escalate. Customers may take to social platforms or other digital spaces to express their dissatisfaction. This megaphone effect can create reputational harm that is out of proportion to the scope of the original incident. Even worse, banks may have no idea any of this is occurring.
The truth about feedback in the public sphere is that negative comments often carry more power than positive comments. Potential customers might read nine uniformly positive reviews but be dissuaded by a single poor evaluation — and the impetus for such negative feelings is often a simple breakdown in communication.
How to cultivate trust and loyalty
Once we accept the premise that a truly informed customer is a better customer, we can put a process in place to ensure that customers are treated in a fully transparent and honest fashion. Here are a few things to consider while building transparent client relationships:
- Make an effort to ensure that all customers understand the features, benefits and penalties associated with all products and services. There’s no point in trying to downplay information that potential customers might not find appealing. This kind of soft deception could lead to hard feelings down the road
- Arm customers with information, but let them make the decision. This isn’t at odds with the desire to open more accounts. Customers who understand the value proposition offered will convert
- Understand the value of transparency; it’s critical to good customer service. An honest, upfront approach earns loyalty and goodwill. It deepens relationships. This will ultimately help you maintain enduring bonds with your client base
The Wells Fargo debacle stands as a shining example of failed customer service. Yet it doesn’t take a mammoth, high-profile scandal to prevent you from reaching your customer retention goals.
In order to build lasting relationships, financial organizations should endeavor to emphasize transparency and disclosure at every step of the process. Informed customers are better customers, because they believe they are being treated fairly and honestly.
Jim Dellavilla | Chief Client Officer
As CCO, Jim directs strategy for all of Catalyst’s accounts. This Siena College grad has spent time on both sides of the fence – on the client side at Chase Manhattan Bank and on the agency side as a manager/director of all client relationship teams at Sigma Marketing.