Like many of you, I was sickened (but not surprised) by the latest banking scandal. This one involved Wells Fargo. It was fined a record $185 million by the Consumer Financial Protection Bureau over illegal practices relating to account openings.

The details hardly inspire confidence. Former employees describe a harrowing atmosphere of intense pressure to open unnecessary bank accounts, and to sell “at least eight financial products per customer.”

A checkered history

Don’t expect the record fine to deter similar conduct in the future. One analyst observed: “The fine is a rounding error, and I don’t see any unintended consequences.”

The culture of shameless greed is not unique to Wells Fargo. You can find a list of the seven largest sanction-related fines against banks here. The list of miscreants includes BNP Paribas, HBSC, ING, Credit Suisse, Lloyds TSB Bank, Barclays and Standard Chartered.

The conduct of these banks largely involved engaging in transactions with countries and entities on the U.S. sanctions list.

The SEC published a list of enforcement actions relating to misconduct that led to or arose from the financial crisis. Almost every well-known bank and brokerage firm is on it. Their conduct involved a litany of fraudulent and deceptive practices that victimized millions of investors and precipitated a massive financial crisis, from which we still have not recovered.

A troubling anomaly

The fact that U.S. investors continue to entrust their retirement savings to companies with this checkered past is one of the great anomalies of our time. It’s compounded by the fact that these firms are permitted to (and often do) have undisclosed conflicts of interest with their clients and have no legal obligation to put the interest of their clients ahead of their own. It’s the perfect storm for a relationship where “managing money” often results in the transfer of wealth from those who earned it to those who “manage” it.

Better options

It’s not that you don’t have options. You could (and should) either invest yourself using one of the many “robo-advisors” who are rapidly changing the investing landscape. Vanguard, Fidelity and Schwab have their own robo-advisor offerings. Well-known and reputable independent robo-advisors include BettermentWealthfrontPersonal CapitalAsset Builder, and Rebalance IRA.

All of these firms provide sound investing advice at a very low cost. None of them have the tainted history of the banks and brokerage firms discussed above.

If you need the services of an advisor, limit your search to registered investment advisors (RIAs). They have a legal obligation to place your interests first and to disclose all conflicts of interest. Consider RIAs who base their advice on sound, peer-reviewed evidence. These advisors understand overwhelming data indicating that trying to “beat the market” using stock picking, market timing and fund manager selection is often a loser’s game. A good starting point in your research is the websiteof Dimensional Fund Advisors.

A silver lining

I understand the financial motive of banks like Wells Fargo that want to sell you “at least eight financial products”. However, if you conclude that dealing with entities with a troublesome regulatory history is not in your best interest, you will have discovered a silver lining in this mess.


A Silver Lining in the Wells Fargo Mess blog was originally posted on The Huffington Post website.

Dan Solin is a New York Times bestselling author of the Smartest series of books, including The Smartest Investment Book You’ll Ever ReadThe Smartest Retirement Book You’ll Ever ReadThe Smartest 401(k) Book You’ll Ever Readand his latest, The Smartest Sales Book You’ll Ever Read. He is a wealth advisor with Buckingham and Director of Investor Advocacy for The BAM ALLIANCE.

The views of the author are his alone and may not represent the views of his affiliated firms. Any data, information and content on this blog is for information purposes only and should not be construed as an offer of advisory services.