Responding to why Wells Fargo had a cross-selling goal of eight, CEO John Stumpf replied in the 2010 annual report, “The answer is, it rhymed with ‘great.’ Perhaps our new cheer should be: ‘Let’s go again, for 10!’”

If that doesn’t convey the message strongly enough, I’ll say it more bluntly: Wells Fargo, which is the number 1 profit-making U.S. bank, is all about sales. In fact, it might come as no surprise that this bank, which has often had peers try to learn from and copy its sales strategies, is facing a $185 million fine for widespread illegal sales practices.

Now, there is nothing inherently wrong with cross-selling, which just means attempting to deepen a current client relationship by offering more products or services. Often, this can be a big benefit to the customer. However, opening up accounts or lines of credit without customer consent is unethical, and investigators found Wells Fargo employees had done that at least two million times. Overall, most products offered by the bank were found to have been affected by illegal sales practices. The scary thing is not what regulators found, but what they have no authority to investigate. Here are a few points to understand:

1. Incentives are everything. Bank employees are incentivized to do very specific things: sell mutual fund accounts, annuities, new accounts, mortgages and credit cards. The best bankers with the best of intentions have the same sales goals as everyone else, and if they don’t meet them, they’re out of a job.  
2. Bank employees do not owe customers a fiduciary duty. That means their recommendations do not have to have your best interests at heart. They are essentially showing products to you, but they are not responsible for even knowing if they’re  right for you or even if they’re necessary. Your actions are 100% your responsibility.  
3. Wells Fargo employees got in trouble because they did things without the knowledge of the client, not because they made recommendations that were inappropriate. This is a very important distinction. What doesn’t show up is clients who were sold expensive “managed accounts” or annuities full of layers of fees on proprietary products when a more customized and lower-cost approach would’ve been available.
4. Crime pays. Carrie Tolstedt, who presided over the guilty division and has long had her big bonuses attributed to strong cross-sell ratios, announced her retirement soon after the news came to light. Despite Wells Fargo’s huge fine, Tolstedt stands to collect a cool $124 million payday as she exits. Also notable is that she made donations to many candidates, including presidential hopeful Hillary Clinton (D), Senator Jon Tester (D), Senator Charles Schumer (D), and Senator Mark Warner (D). Most of these folks are current or former members of the Senate Committee on Banking, Housing and Urban Affairs.

On a related topic, this is another reason why investing in individual stocks can be tricky. Problems have a tendency to work their way back up and down the food chain of a firm, which inflates them over time. Executives create lofty incentives and consequences. Sales personnel find a way to game the system, which helps everyone’s payday. The next year, executives plan for the next level by using numbers they don’t realize are bogus and send the expectations down to the front lines again. Each time this happens, more people are pressured into dishonesty or into resulting to dishonesty more often. By the time the executives are on to it, the balloon is already inflated to a point where they are afraid if they move too quickly, it will pop. How can an individual investor see something like this ahead of time? There is more to it than the bottom line. This is exactly why I have said I can’t invest in many stocks because I don’t understand how they are producing their numbers. Something smells fishy.

Again, cross-selling isn’t always a bad thing, but it certainly can be when the people recommending the additional products and services aren’t mandated to work in your best interests and their incentives don’t line up with yours.

A recent conversation I had with one of our Certified Financial Planner™ professionals (CFP® professional) and a new client provides a great example of how working with a fiduciary is different when “cross-selling” is involved. At one point in the conversation, the planner explained to the client why we felt he was under-insured. After a pause, the client asked, “How do I know you aren’t just trying to selling me some insurance that pays you a high commission?”  We were ready for that question. Our answer?, “Because we don’t sell insurance.” The planner went on to explain that we are fee-only advisors and thus the fee he was already paying us was our only source of revenue. We could help him find the insurance, or he could go find it himself. Either way, our compensation is the same. Since we can’t get paid for this advice, I understand why some might argue this technically isn’t cross-selling. However you define it, the fact remains that people do need to know about other products and understand why they might be beneficial for them. Getting that information from an unbiased source offers advantages that I need not further expound on.