7 Things You Don’t Know About Wells Fargo’s New CEO

Wells Fargo's beleaguered board gets high marks for coaxing the CEO of Bank of New York Mellon to walk from a demanding but lower-profile post to take the hotseat at the country's most stigmatized bank. What kind of person volunteers for such a challenge? And will he be able to help Wells finally turn the corner?

One of Jamie Dimon’s most staunch lieutenants, a man he worked closely with for more than two decades and referred to as “a trusted friend,” will now be heading up the still formidable Wells Fargo & Co. In an unusual gesture, Dimon said publicly that his former protege is an “excellent choice for this important role … he is a first-class leader.”

Just seven years ago Charles Scharf, who goes by Charlie, was widely regarded as a likely successor to Dimon as CEO of JPMorganChase. And who knows? If Scharf is successful in returning Wells to glory after several scandal-plagued years, he could yet return to run Chase.

Actually he wouldn’t even have to move. Scharf plans to run the country’s third-largest bank from New York, where he and his family live, not from Wells Fargo’s San Francisco headquarters.

Charles Scharf here's the future quote

From many perspectives it will be fascinating to watch how this story unfolds as the banking giant enters the latest chapter in its efforts to recover from its setbacks and scandals.

All this may seem like a kick in the teeth for the folks at Bank of New York Mellon. Scharf, 54, had been CEO of the clearing and asset management powerhouse for just over two years before agreeing to join Wells Fargo. Scharf was even hailed as the “best CEO of the bank since Alexander Hamilton.” The country’s first Secretary of the Treasury was among the founders of The Bank of New York in 1784.

BNY Mellon’s record under Scharf was mixed, but most agree he wasn’t there long enough to see his changes — notably big technology investments and efficiency moves — reach fruition.

Scharf’s challenges at Wells Fargo are quite different. Like any giant financial institution, operations and processes can be improved, but Job 1 will clearly be to build morale and reassure customers, employees, investors, and, notably, regulators that the seemingly endless string of scandals is over and that the ship is finally headed in the right direction. Removal of the Federal Reserve’s asset-growth cap is essential for Wells to keep arch-rivals Chase and Bank of America within sight.

What Scharf won’t need to do is turn a sleepy old bank into a digital powerhouse. Wells Fargo’s employees kept the bank’s momentum in that area going through all the years of scandal.

The giant institution’s 259,000 employees, along with the rest of the banking industry, will be watching Charlie Scharf’s progress closely. Here are seven insights about the banker who is now very much in the spotlight.

1. Scharf Spent His Earliest Days Working with Wall Street Legends

Scharf and Jamie Dimon first worked together at Commercial Credit in Baltimore in 1987. Dimon, 9 years older than Scharf, was a young CFO working for Wall Street titan Sandy Weill. As Scharf tells it, his father, a broker at Loeb Rhoades (and later at Shearson, which Weill ran), had been lobbying his son, who was a senior at Johns Hopkins, to send his resume to Commercial Credit. He had read that Weill, Dimon and Bob Lipp, former President of Chemical Bank, were in the early stages of building Commercial Credit into something big. A family connection helped get the resume in front of Dimon, who offered Scharf the same day he interviewed him.

For six months Scharf worked for someone else. When Dimon would ask him how the job was going, he would answer that he didn’t find it very challenging. After hearing that a couple of times Dimon said: “Fine, you want to be challenged — come work for me.”

“Scharf was along for the whole ride, working with Dimon, Weill and Lipp to turn Commercial Credit into Travelers Group, then Citigroup.”

For the next few years the young man worked as Dimon’s assistant. Scharf sat in on all the meetings as “three legends,” as he describes them, did the deals that built Travelers Group (Travelers, Primerica, Salomon Bros., et al), culminating in the megamerger with Citicorp in 1998 that created Citigroup. Scharf was along for the whole ride, playing key roles including CFO of Salomon Smith Barney at age 30.

Scharf then followed Dimon to Bank One, after the latter’s ouster from Citi in 1998, and followed his boss and mentor again to Chase, after it acquired Bank One. At Chase Scharf ran the bank’s huge retail banking operation. During this period he helped orchestrate the merger with failing Washington Mutual (WaMu), which gave Chase a coast-to-coast retail presence.

Out of that success grew the one significant blemish on an otherwise impressive resume. Big losses, embarrassing fines, and bad publicity from the bank’s mortgage business hurt the retail group’s performance. In 2011 Scharf asked Dimon to be reassigned to a more entrepreneurial position.

The chief accommodated his lieutenant with a partnership in the bank’s internal private equity unit. The move meant Scharf gave up his seat on the Chase Operating Committee, however, and many observers painted it as a demotion.

About a year later, Scharf was recruited away to be CEO of Visa.

Read More: How Chase Bank is Tackling Top Digital & Mobile Challenges

2. Scharf Walked Away from Top Job at Visa for Family

For an East Coast, Wall Street guy, Visa proved a very good fit for Scharf. He donned black jeans, an open-necked shirt and sport coat at the payments company (keeping that look at BNY Mellon, too). In his four years as CEO, total shareholder return increased by more than 130% and he was instrumental in transforming what was still a traditional payments company into a digital payments platform for the e-commerce age.

Scharf’s family, however, had remained in the New York metro area and he commuted back and forth whenever he could. After four years, despite success at a job he relished, Sharf did what few CEOs have done under similar circumstances.

He resigned.

In a memo to Visa employees he said, “I am sad to have reached the conclusion that I should step down, but running a San Francisco-based company just doesn’t work for me personally right now and wouldn’t be fair to Visa.”

“I love my job, but my family defines me first, not my job.” Charles Scharf explaining giving up the top job at Visa

“Being six hours away just wasn’t the right thing for one of our family members quite frankly,” Scharf said, referring to himself, on a podcast with David Novak of oGoLead. “I love my job, but my family defines me first, not my job.”

Many executives say that. But how many have resigned from a Fortune 500 job in response? Scharf joined BNY Mellon about nine months after announcing the resignation.

People may ask: Why didn’t he just work from New York, where Visa has an office? Scharf says the board was comfortable with that, but he wasn’t. As he told Novak, “I firmly believe that when you’re physically together lots of good comes of that — hallway conversations, getting to know people at lunches, dinners, coffee, all of those things and so I just didn’t think it was the right thing for the leader not to be present.”

Reality check: People change their minds and circumstances change. With the Wells Fargo job, Scharf is sticking to his guns about being with his family, but clearly has changed his mind about working remotely. He will run the bank from New York primarily and the Wells Fargo board agreed to that.

3. Scharf’s Management Style is Reserved, Hands-On, Inclusive, Intense

Here’s a portrait of the new Wells Fargo CEO from various sources reviewed by The Financial Brand, including comments from Scharf himself.

“Scharf is well-known within J.P. Morgan as a methodical, decisive and sometimes prickly executive who doesn’t like loads of bureaucracy,” the Wall Street Journal reported at the time Scharf joined Visa. The Journal noted that those traits may shake up employees at organizations that rely heavily on meetings and group discussions.

“At the same time, he also is known as being somewhat shy and more comfortable addressing people in small groups rather than large audiences,” the newspaper observed. Another Journal article noted: “Whereas Mr. Dimon is gregarious and prone to saying what is on his mind, Mr. Scharf is reserved and careful.”

At BNY Mellon, Scharf shook up the staid culture, eliminating traditional executive offices, including his own.

Reserved in his words, perhaps, but aggressive in actions at times. At Bank of New York Mellon, for example, Scharf shook up the formal, staid culture, eliminating traditional executive offices that had walls and doors — his own included.

“We have no offices now, we have cubicles,” he stated during a Milken Institute panel. “They’re nice cubicles but they’re cubicles. And we are much more engaged with the employees in the organization.”

Scharf is described as a hands-on manager. Always reading and asking questions. One example cited by Fortune was when Chase was preparing to launch mobile check deposits. Scharf, then CEO of the bank’s retail unit, made a personal visit to mobile-capture technology vendor Mitek Systems to see for himself how the technology would work.

The veteran banking executive is described — and describes himself — as being careful not to move too quickly. A trait he has learned in multiple assignments where he arrived as an outsider.

Recalling his time at Visa, as well as at BNY Mellon, Scharf told David Novak that he definitely comes in with a point of view, but says “it isn’t me dictating.”

“I learned a long time ago that you’re just far better off if you want to move a large group of people forward by winning their hearts and their minds and making them part of the process to get there, than by just telling people ‘you have to do’ something.”

On a personal note, NYU Stern’s newsletter says of its alumnus Scharf: “Tennis is his sport, and rock and blues guitar his passion – that and woodworking, which he said he finds ‘very soothing’.” The article says Scharf made and installed the raised paneling and bookshelves in his home library.

4. ‘Change or You’ll Be Irrelevant’ is Scharf’s Mantra

His experiences at both Visa and BNY Mellon offer windows into Scharf’s thinking about the radical changes sweeping through financial services.

“There are people targeting every one of our businesses with better technology.”
— Charles Scharf

“There are people targeting every one of our businesses with better technology,” Scharf said during the Milken Institute panel. He added: “One of my favorite quotes that I repeat all the time is “If you don’t like change, you’ll like irrelevance even less’.”

Wells Fargo, though a digital banking pioneer, is still an organization steeped in more than 100 years of history. A moderator asked how an outsider can introduce change into a venerable organization. Scharf responded:

“First, you need a deep appreciation for all the work done by the people in the company to get to the point where we have an opportunity to evolve. You can’t walk in, especially as an outsider, and say ‘Forget everything you’ve done, here’s the future, I’ve got it figured out’.”

Employees all need to be part of it and the CEO’s job is to get them on board, he said, by “talking openly about what we’re doing and why.”

And if they don’t get on board?

“You have to parse that and be fair,” Scharf said. “But when all is said and done, especially at the first couple of levels of the organization, you need to have people in those roles who are going to be change agents.”

While a strategy is being formed, however, Scharf wants all the input he can get. That’s one reason he likes having Millennials in an organization.

“They’re much more involved,” Scharf observes. “They want to understand why we’re doing what we’re doing and whether that’s actually good for the communities we touch. Personally I think that’s super healthy, because it pushes you. Individuals can get very set in their ways and you need to be kept current by a fresh generation that’s thinking differently.”

Read More:

5. He Believes Partnering and Platforms Will Keep You in the Game

Wells Fargo has already moved aggressively to partner and invest in fintechs, and Scharf’s Visa experience will be invaluable to continuing that practice. As he noted on the oGoLead podcast, “In the world we live in today you just have to admit you can’t do everything yourself. There are some really smart people out there with great technology, and partnerships can be hugely valuable.”

He put that into practice at Visa after long internal debate. The company partnered with Apple, PayPal, and invested in Stripe, even though it was a competitor in one area.

On partnering with fintechs: “My perspective is we can learn from outsiders in the industry.”
— Charles Scharf

“My perspective,” said Scharf, regarding these arrangements, “was that it was a growth part of the marketplace. It wasn’t either ‘them or us.’ We could both be successful and we could actually learn from outsiders in the industry.”

All players in financial services, Scharf maintains, ‘should be asking themselves, “Can we be replaced?” The answer is theoretically, yes, they can, he says. “So what are they doing about it?”

Incumbency, however, should be a benefit to traditional financial institutions, as long as they don’t take it as a guarantee of success, Scharf believes. “If you use that advantage to adapt to change, it can give you lead time to pivot in different directions.” Visa’s incumbency as a major payments player was a big help, he says, because “We were late to the platform game.”

6. Branch Role Remains an Open Question for Wells

The industry will closely watch what Charlie Scharf does with Wells Fargo’s branch network, numbering between 5,600-5,700, depending on the pace of some announced closures. There’s little current information to go by since he’s coming from a bank (BNY Mellon) that sold off its retail business years ago, and Visa, of course, isn’t a bank.

Looking further back, when he ran retail at Chase, Scharf was instrumental in the decision to scrap WaMu’s Occasio branch design after the merger. Occasio, with its prominent “concierge” and tellers working at standing desks in a circular area, was a stunning change from the normal branches of the early 2000s.

Commenting on the decision to ditch the look, Scharf told the Wall Street Journal then that traditional branches “are superior in every way. They might be boring, but they’re practical.” The New York bank also felt the WaMu branches’ touchy-feely design was confusing and inconvenient.

That was ten years ago and although the Occasio branches didn’t seem to help WaMu at the time, they may simply have been ahead of their time. Now even Chase is altering many of its branches to rely more on technology. It also opened a glitzy flagship branch in Manhattan that is anything but typical and picks up on the circular theme of Occasio in some aspects.

It will be interesting to see whether Scharf continues closing Wells Fargo branches, remakes them into advisory and/or experiential centers, or a little of both.

7. Charlie Scharf’s Greatest Management Lesson

After Scharf left Chase to join Visa, a “couple of my friends” took his Chase retail job and began to make changes. “I remember my initial reaction was very defensive: ‘What are they doing?'” he recounted to David Novak on his podcast.

Over several months, as he watched what they did and saw the impact of it, Scharf said he remembers thinking, “Why didn’t I think of that?” He says the experience was a good wake-up call.

“When you come into work every day you get comfortable in your decisions and in the environment you’re in. We all have a certain amount of defensiveness in us and it’s generally not a good thing.” To be able to reinvent yourself to get that fresh perspective, Scharf maintains, is something that all leaders, and businesses, could benefit from.

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