Performing
Pfäffikon SZ, Switzerland – When a modest investment manager is asked in which bank one can best invest globally seen he will advise Wells Fargo. The success of the bank is impressive but, meanwhile, has left a trail of fraud. The pressure to perform was obviously too high and encouraged fraud. At Volkswagen, for example, we also saw this phenomenon.
Swindle
Since 2011, employees of Wells Fargo have extensively scammed customers. They opened fake accounts, requested unsolicited credit cards and charged their clients for this. That the internal control system of Wells Fargo failed miserably is very painful. Additionally, external auditors seem to be misled professionally. That as many as 5,300 people have been able to open 2 million fake accounts is a hard laughter for the ‘best bank’ in the world.
The dividing line between the pressure from management and the requirement to perform at Wells Fargo has simply been too vague. Wells Fargo has to maintain an excellent reputation and has gone too far due to its relentless drive to deliver. The reaction of Wells Fargo on this course of action makes no sense. At Volkswagen, we see more or less the same pattern; trying to force something down which can never be lived up to by the car manufacturer.
Copy
The best investment is an investment that is quite unknown to the general public and has a structural undervaluation. To find these investments, a lot of individual research is required; often there is no time for this and is the sales pitch more important. Besides that, such an investment requires patience; something investors do not possess as the issues of the day usually prevails. The Wells Fargo case characterizes some problems that can not bear the light. The fact that employees of Wells Fargo have structurally spoiled the bank’s reputation is unforgivable in the financial world.
Investment managers are often copying positions of one of the best investors in the world; Warren Buffett. Wells Fargo is a good example of this. The lesson is that the motives of Buffett are not yours, copying is, therefore, pointless. Each investor should conduct its own research and take into account its own considerations. There are banks with a better business model and more perspective than Wells Fargo in which you can also invest. Personally, I’m very curious how an investor like Buffett will respond to the fraud at Wells Fargo. When he acts as in the past, he sells his interest over time and says tacitly farewell to the best bank in the world.
It remains for me to wish you a good weekend.
Jan Dwarshuis is a senior asset manager at Thirteen Asset Management AG, where he is responsible for the Thirteen Diversified Fund. Dwarshuis writes his columns in a personal capacity and is not paid for them. Nor is he paying for his columns to be placed. Professionally, he holds positions in major European, American and Russian stock funds. The information in his columns is not intended as professional investment advice or a recommendation to make certain investments. At the time of writing, he has no position in the above mentioned shares and has no intention of doing so in the next 72 hours.
