The Financial Services Authority has extended the terms of its review of staff incentive schemes and issued final guidance on the kind of arrangements it will consider acceptable and appropriate.
The terms of the review will extend to apply to all businesses which offer either advice or sales to the public and offer some form of incentives to staff members, and will now also review how well they respond to the initial guidance.
‘Finalising this guidance is important because it gives financial firms a clear idea of what we expect from them and how they should manage their incentive schemes,’ said FSA director Martin Wheatley.
‘It also marks a key step in changing the culture of viewing consumers as a sales target to somebody to serve. I have been encouraged by a number of firms that have already overhauled their reward structures, but I want to see others following suit.
‘When I speak to the bosses of the banks they tell me they want to change, and this is good, but real cultural change will only happen if attitudes shift throughout an organisation from the CEO to the frontline sales personnel.’
The review of banks, building societies, insurers and investment firms was originally published in September 2012, and found that the majority of incentive schemes were likely to promote mis-selling.
Most companies also failed to adequately manage the risk that staff would inappropriately sell, and had designed in such complexity that effective management would be near impossible.
Pressure to hit sales targets at some businesses was such that some staff were mis-selling out of a fear that otherwise they would lose their jobs, or be subject to disciplinary action.
The FSA said it would be reviewing staff management practices, and it would penalise companies which shifted sales pressures from financial incentives to performance targets.