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View the article online at http://citywire.co.uk/wealth-manager/article/a737620

FCA finds 10% of firms still have high risk incentive schemes

by Dylan Lobo on Mar 04, 2014 at 10:04

FCA finds 10% of firms still have high risk incentive schemes

The Financial Conduct Authority has found one in 10 sales teams at financial services firms were not managing risk properly.

While firms have either replaced or made substantial changes to financial incentive schemes, which played such a major role in the mis-selling scandals of recent years, the FCA said there is still plenty of work to do.

In its latest review the regulator accepted a number of improvements had been made, but identified a number of areas common across the industry where further work was needed. This was apparent in 10% of sales teams with higher-risk incentive schemes.

The areas where the FCA believes improvement is needed are:  

* checking for spikes or trends in the sales patterns of individuals to identify areas of increased risk

* doing more to monitor poor behaviour in face-to-face sales conversations

* managing the risks in discretionary incentive schemes and balanced scorecards, including the risk that discretion could be misused

* monitoring non-advised sales to ensure staff who are incentivised to sell do not give personal recommendations

* improving oversight of incentives used by appointed representatives

* recognising that remuneration that is effectively 100% variable pay based on sales, increases the risk of mis-selling and managing this risk

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