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FCA: Firms still failing to manage sales incentive risks

Financial services firms are still failing to properly manage the risks of sales incentive schemes, says the FCA.

In the regulator’s latest review of sales incentives, published this week, it says one in 10 firms with sales teams had high-risk incentive schemes and were not managing the risk properly.

The FCA says while it found significant improvements at firms of all sizes, there are still a number of areas of concern.

These include checking for spikes in staff sales patterns to identify areas of increased risk; doing more to monitor poor behaviour in face-to-face sales; managing the risks in discretionary incentive schemes and balanced scorecards; and monitoring non-advised sales to ensure staff who are incentivised to sell do not give personal recommendations.

The regulator says there needs to be improved oversight of incentives used by appointed representatives. It also says firms need to recognise that where pay is 100 per cent variable based on sales, this can increase the risk of misselling. 

The FCA first published a report on sales incentives in September 2012, and put out final guidance in January 2013.

FCA chief executive Martin Wheatley says: “18 months ago we gave the industry a wake-up call and it recognised that a poor incentive culture had helped push bad sales practice.

“We have seen some good progress but it is going to take time to see whether the changes firms are part of genuine cultural change.”

Pavilion Financial Services financial adviser Claire Walsh says: “Banks offering a non-advised service involving a face-to-face discussion run a high risk of confusing customers into thinking they have received advice.”


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