The British Financial Services Authority (FSA) published final guidance that should help financial firms to avoid creating and operating incentive schemes that drive mis-selling.
Already in September 2012 the FSA published a review of sales incentives and asked for feedback on proposed guidance. The now published final version concretizes some aspects of the original version.
Managing director of the FSA, Martin Wheatley, explained: “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. It also marks a key step in changing the culture of viewing consumers as a sales target to somebody to serve.”
At the same time he announced that the FSA was planning to widen its review of sales incentives and to review how firms are acting on its guidance.
The review, which was published in September 2012 (see also ConPolicy news of 05th of September 2012) revealed:
- firms had not properly identified the risks posed by their incentive schemes to ensure effective controls were in place. Some schemes were so complex that management did not understand them;
- sales quality generally had much less of an impact on staff incentives than the quantity sold; and
- some sales managers earned a bonus on the volume of sales made by the staff they supervised. This created a conflict of interest for managers who also played a significant role in checking the sales quality of their staff, the risks of which were not adequately managed.
Further information: http://www.fsa.gov.uk/library/communication/pr/2013/004.shtml