Monasteries and convents were not alone in their wealth. The upper ranks of the Church - bishops, archbishops, cardinals, and the popes themselves - were almost exclusively drawn from the European nobility. Lower-ranking churchmen were, in turn, commoners, often drawn from the ranks of the same peasants that they ministered to from one of the small parish churches that dotted the landscape. All of the wealth that went into the Church, from an obligatory tax called the tithe, was siphoned up to the upper reaches of the institutional Church, and many of the high-level priests lived like princes as a result.
Morality in this setting was, predictably, lax. Despite the nominal requirement not to marry, many high-level priests lived openly with concubines and equally openly supported their children, seeing their sons set up as landowners or members of the Church in their own right and marrying off daughters to noble families. Despite the injunction to live simply and avoid luxury, many priests (and monks, and nuns) were greedy and ostentatious; one notorious practice was of bishops or archbishops who controlled and received incomes from many different territories (called "bishoprics") at once but never actually visited them. Another practice was of noblemen literally buying positions in the Church for their sons - teenage boys might find themselves appointed bishops thanks to the financial intervention of their fathers, with Church officials pocketing the bribe. Medieval depictions of hell were full of the image of priests, monks, and nuns all plummeting into the fire to face eternal torment for what a profoundly poor job they had done while alive in living up to the moral demands of their respective vocations. In other words, medieval laypeople were well aware of how corrupt many in the Church actually were.
In addition, while medieval education and literacy was almost entirely confined to the church as an institution, many rural priests were at best semi-literate. All Church services were conducted in Latin, and yet some priests understood Latin only poorly, if at all (it had long since vanished as a vernacular language in Europe). Thus, some of the very caretakers of Christian belief in medieval society often had a very shallow understanding of what that belief was supposed to consist of theologically.
For all of the Middle Ages, however, the fact that the lay public knew that the Church was corrupt and that many of its members were incompetent was of limited practical importance. There was no alternative. Without the Church, without the sacraments only it could offer, without the prayers issued by monks and nuns for the souls of believers, and without its reassurance of a life to come after death, medieval Christians were certain that their eternal souls were damned to hell.