Bove pulls account from Wells Fargo, but recommends stock
So who does a bank serve, its shareholders or its customers?
The knee-jerk answer is both, but few would doubt that there's a trade-off in these days of limited resources. The best line of action might be to do just enough for customers to keep revenue at levels that will ultimately please shareholders. You don't want to spark a mass defection, but you don't want to spend unnecessarily on keeping retail customers happy.
Richard Bove has sounded off on this issue in a highly personal way. In a research note to clients, he recounts how the customer service at his local Wells Fargo branch was so bad that he gave up on it, switching to another bank all together.
"But instead of trashing the bank and its stock, Mr. Bove in his Tuesday note shared his latest epiphany: Catering to customers may actually distract from the pursuit of making money in the new world of finance. What really matters, he now believes, is pushing products and managing risk," notes the New York Times.
He was quoted saying that, "I'm struck by the fact that the service is so bad, and yet the company is so good. Whatever it is that drives people to do business with a given bank, in my mind, now has to be rethought."
The conclusion is that, "Spending time solving problems with people is not selling products," said Mr. Bove. "It's wasting time."
The reality may be that people are accustomed to poor customer service and are relying more on online and mobile banking, where they do not have to interact with bank employees. People may also assume that service is cruddy at all banks, which will incline them to stay put in the face of bad service. In any case, it does appear that the perception of good service has become a casualty of the financial crisis--not that it matters.
- here's the article