The FSA has warned that banks are pushing consumers into complex wealth management products that are unsuitable and are using “aggressive” sales incentives to motivate staff.
In its retail conduct risk outlook this week, the regulator warns that the retail banking channel has increasingly been used to sell complex investment products such as structured products.
The FSA is concerned private banking clients may be persuaded to take more risk with their investments than they want to as aggressive sales incentives push staff to highlight product benefits and downplay risks.
The FSA says: “A potential risk we see in this area is banks inappropriately selling to affluent and mass affluent customers, either by up-selling them into private banking or by offering, via their retail banking arm, wealth management products that are not suitable to customer circumstances. Poor risk profiling may have already resulted in the up-risking of some retail customers.”
The regulator is carrying out an investigation into conduct of wealth management firms after it identified poor practice among banks’ wealth management subsidiaries and independent wealth managers.
It found cases where clients’ risk levels had been increased, complex and expensive products were recommended and data had been used which understated risks.
Technology & Technical managing director Kim North says: “Where staff are driven by sales targets the culture is always going to be about flogging products.”