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FCA: Firms still using pressure tactics on sales staff

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The FCA says firms are still failing to make progress on reforming sales incentives more than four months after the regulator raised concerns about misselling risks.

After a probe of performance management of sales staff, including advisers and intermediary firms, the regulator laid out its concerns about potential misselling among firms dealing with retail customers in mid-March.

However, it has now acknowledged that some firms have been paying lip service to its proposals.

The FCA says: “We have been made aware of intelligence from whistleblowers to the FCA and media articles suggesting that, in some cases, the changes to reward structures may not have been accompanied by a genuine shift away from a sales-focused culture.

“Instead, there are indications that in some cases the progress made on financial incentives may have led to an increase in pressure being placed on staff through other means, to achieve sales.”

The regulator cites examples including the use of sales results to influence decisions on if and when annual leave can be taken, and which staff have access to development opportunities.

In addition, the FCA found evidence of firms where written policies indicated a supportive approach to underperformance against sales targets, but actual management culture was to “rule by fear” and use threats of disciplinary action.

In final guidance published by the regulator this week, the FCA says it will maintain a continuing dialogue with the industry in order to seek improvement.

It says: “Through our firm supervision work we will continue to asses how firms are managing this risk and what changes they have made in response to this report, taking action where needed.

“We will also continue to act on intelligence from whistleblowers where appropriate and we will consider the need for any further work in future.”

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Comments

There are 24 comments at the moment, we would love to hear your opinion too.

  1. Imagine that – sales people at firms being put under pressure to hit sales targets? Well I never…. Rightly or wrongly firms set sales targets for one reason and one reason only and that is to be commercially viable. If those people who are lagging behind aren’t encouraged to hit targets then they become a cost to the business not an asset. The FCA still live in this make-believe world where people who work in sales firms should be paid to give advice (regardless of whether or not a sale is made) and that firms should simply just soak up the costs. The really do live in cuckoo land. The entire world of business can only survive and thrive if people sell their product and the sooner they realise the better.
    In this day and age I do not believe there is miss-selling going on any more. I firmly believe however a lot of mis-documenting is going on. We try hard to do our best for clients in matching suitable products to clients needs and objective and then are accused of miss-selling because what is in the file does not match the regulator’s belief of what should be in there, how it should be presented along with all the risk warnings etc that we need to include.

  2. Sales Targets may be one thing, but I have noticed something even more insidious – these targets or incentives seem often to be bound up with naked shoe-horning, dressed up to look as if it is to the clients’ advantage when often it is nothing of the kind.

  3. Lets be clear I don’t know anybody who operate like this 1980s throw back. If a company acts like that they need to go and flog cars, water filters or similar as it is retarded. Just do something else as they give us all a bad name. Personally I am surprised it happens given the advice gap and the fact that good IFAs I know are being more choosy who they take on as clients.

    Glad to hear whistle blowers are being picked up now. In the past they went to the spreadsheet in the sky or were ignored.

    Why not name and shame the companies (although I suspect I can name a couple) and then recruits in the industry know who to avoid.

  4. In what sales environment are there no targets? (FCA staff and directors are awarded bonuses without having to sell anything at all and they seem to get them even if they’ve screwed up but, as David Kenmir was wont to say, “That’s different”. Isn’t it always?)

    If you’re employed to sell, you have to generate sufficient revenues to justify what the firm is paying you. Otherwise, you’re just a non- (or inadequately) productive overhead.

    The problem, as I see it (and, as with so many things, I really don’t understand why the FCA doesn’t see it likewise) is one of culture, not targets. The banks (as most IFA’s have already done) must evolve away from their traditional and deeply rooted flog/forget/move on to the next sale way of thinking and view the initial sales process as the start of a long term ongoing client relationship, with less reliance on initial sales earnings and more on recurring, long term service-based earnings.

    Shouldn’t the FCA be helping them to make this transition?

  5. If you read the report ‘culture’ is exactly what the FCA is talking about changing and there is guidance and good practice in the report. Given that one aspect they talk about is selling credit cards instead of loans we can assume that it is still the Banks that are the problem here and there will be follow up visits I am sure.

  6. Trevor Harrington 28th July 2015 at 11:27 am

    There will always be a correlation between sales and the viability of the individual Adviser within the company. This is no different to any service business or profession, including those bastions of self control and client service, called Accountants and Solicitors.

    The issue is, and always was, that if you have a highly motivational sales system, you MUST have a correspondingly robust system of quality control. In the IFA community, this means that someone has to do an awful lot of client file reviews on the business being recommended and transacted by the Advisers under his/her control.

    None of this is rocket science. A simple glance through an Advisers’ monthly transaction book and any experienced morally intact manager with the appropriate experience, can pick out the contentious cases for review, very easily indeed.

    The real issue comes when the company concerned is going flat out for sales, has an overseeing manager who has little or no experience, and where the primary motivation is transactional revenue, as distinct from recurring revenue with ongoing service.

    Hey ho – off we go into a discussion about the level of service Vs ongoing fees or trail commission, if you prefer the name.

    The most recent occurrence of mass selling for initial transactional fees, without sufficient safeguards on quality control has been the transfer to SIPPS business, for not apparent reason or benefit to the client.

    If you are in doubt about the gravity and extent of this problem, look no further than your current ICS bill.

    Of course, the FCA are correct in their fears as outlined in the above article. However, the point is – what are they doing about it – why has it taken so long for them to spot the problem – and will they please listen this time, to those of us who know the solution.

  7. Christopher Petrie 28th July 2015 at 11:29 am

    The problem seems to be that for many firms the “sale” is a financial product, not the “sale” of advice, ongoing planning or ongoing investment/pension advice.

    If sales targets were for getting new clients to take advice and, ideally, pay retainers for that ongoing advice, rather than being so product-focused, the FCA would have few complaints.

    All businesses need turnover targets; the problem in retail financial services/advice is that that turnover is still too much geared towards sales of specific new financial products.

  8. Trevor Harrington 28th July 2015 at 11:57 am

    Actually, the problem within the sales culture very often lies with the fact that the individual Adviser only gets a share of his initial transactional fees (commission?), whereupon the company then holds onto the ongoing or repeat fees (trail?) for itself.

    Very narrow minded and incredibly stupid – but this has been the case since the 1980s to my own personal knowledge.

    So why are we still sitting here in 2015 talking about the recurrent problems that this sort of business model or structure precipitates?

    The complete and utter failure of regulators to consider the advice from those who know …. for the last 30 years !!

  9. Strange world we live in where the FCA doesn’t think companies that have sales targets won’t generate sales driven pressure or management by fear, threats of losing your job or disciplinary action. In the real world staff training, compliance, wages et al have a cost and that cost has to be realised by someone some where selling something. They can talk about culture change as much as they want but companies only exist to make a profit unlike a regulator who can post a loss and it doesn’t matter as they just determine they want an additional 10% income from the fee / levy paying community, and we meet that cost. If you’re costing the company who employs you money what on earth do they think will happen? A pat on the back for giving good advice but no business, not likely.
    The whistle-blowers are usually the under achievers, and I guess they’re feeling the heat in the kitchen. If the FCA thinks this is going to change anytime soon they’re sadly mistaken. They need to employ some ex direct sales, home service or bank assurance personnel who’ll show them what really happens in any sales organisation where personal sales targets are set. PIP’s and KPI’s the managers tools, obviously still in use in a company near you….!!!

  10. Christopher Petrie28th July 2015 at 11:29 am

    Spot on. The FCA know exactly what they are doing on this one.

  11. So funny !!
    Not as if they have more pressing issues to worry about !
    But still;
    In good ole FCA tradition, if its negative, lets get it out there !!! we need to continue to put people off regulated advice.

  12. @ Christopher Petrie 28th July 2015 at 11:29 am
    I hear what you are trying to say however I would disagree with one point you make…. “The problem seems to be that for many firms the “sale” is a financial product, not the “sale” of advice, ongoing planning or ongoing investment/pension advice”. Whether we like it or not, it is fact ALL firms, not many firms that relay on these – even pure “advice” firms. Without new products having ever been sold (and continuing to be sold) there cannot be anything for advisers to review in terms of ongoing planning or reviews. I would bet my last dime on the fact that no financial adviser can survive and thrive in the longer term where they don’t advise clients to take out policies/investments/pensions/ISA’s etc etc to meet the client’s needs and objectives. My view is that it is just ludicrous to suggest otherwise. If this was the case no one would ever take out any financial product other than deposit based bank stuff, which as we all know is useless for the medium to long term prosperity of clients.
    Please don’t think I am having “a go at you for your views”, I am not. I am just responding with my own thoughts and as always its just MHO

  13. Julian Stevens 28th July 2015 at 2:53 pm

    If changing the banks’ culture from sell, sell, sell to sell, service and keep on servicing is what the FCA wants to see, then it needs to wake up to the fact that, after all these years of the former, a wholesale change of culture to the latter is very unlikely to happen without a few good hard shoves.

    Is it challenging the banks on the size of their point-of-sale adviser charges relative to the work done? Is it challenging them about their ongoing adviser charges and what services they provide in return for them? Are their IDD’s absolutely explicit about the choices available to clients, as in You can either pay x% p.a. and get this, this and this in return or you can pay nothing and get nothing. That about what it boils down to isn’t it? If they’re charging x% p.a. but providing nothing in return, that would seem to be a point on which the FCA can legitimately intervene on no uncertain terms.

    But I really have neither the time or the interest to look into exactly what the FCA is or isn’t doing on this front. To me, it seems that it could and should be pretty straightforward, but nothing much that the FCA does ever seems to be straightforward. There’s been talk for years of a simplified/streamlined advice framework to get past the ever thickening logjam of compliance, but nothing’s really happened at all has it? They just still thinking about it.

    Perhaps Wheatley’s successor needs to be very much more of a Let’s cut through the crap and GTF on with it mindset.

  14. SO, what is is the FCA going to do about it? I haven’t read about any firms, who conduct themselves in this way, being named and shamed. Come on FCA get your finger out and start pointing it at the firms concerned.

  15. Top of the Board meeting agenda
    1. Pay 100% increase in FCA fees
    2. Ease up on the sales targets

  16. Christopher Petrie 28th July 2015 at 8:45 pm

    @ MartyY. I can only offer my small firms experience. A client bank of established investors, the majority on platforms already. They want ongoing advice, occassional fund switch suggestions, using of ISA allowances within existing portfolios, drawdown advice and assistancw, cashflow planning (for some) and so on. Sometimes we recommend a brand new product but many clients have products that have been appropriate for a decade or longer so for some we haven’t sold a new product to in years and years. It hasn’t stopped them from buying our advice and ongoing service though.

    • So are you saying then Christopher…. you have never sold a pension, ISA, unit trust, platform etc etc etc you just fell upon a bank of clients all on platforms with lovely fund based fees and ready to pay you for your services ?

      Christopher I do apologise for being facetious, but my business model is a bit like yours, I have a bank of clients that I really just service with very little new business, but saying that when I started 24 years ago most if not all had to be sold to (sales pressure or not) and under the pressure of earning a living, and I often get comments, I’m so glad you made me do this, you talked me in to doing that, I dont think I would have been able to retire if it weren’t for you !!

      So the up shot is, we can all be holyier than thou but the fact remains every-one has to have a starting point mine thankfully was over 24 years ago when selling a pension was not the crime it is today, putting £50 quid in a PEP a month was better than putting it in the bank or pissing it away down the pub

      We have so lost our way, being ethical and looking after ones clients is NOT something that can be force fed you either do it or you don’t that unfortunately is down to the individual, we have a regulator who deals with this by completely undermining everything we do.

  17. These reviews, they will be with people who have previously bought products in the main, yes?

  18. Christopher Petrie 29th July 2015 at 9:09 am

    Morning DH, I’m definitely trying not to be “holier than thou”. Just trying to suggest we should aim our “sales targets” as turnover mainly from the sale of ongoing advice, not products.

    Sure, things were totally different 24 years ago, and the name of the game was all about product sales – I remember it well.

    But these days, we have auto-enrolment meaning pension funds are being built up without the need for a “pension sale”. People inherit money in numbers inconceivable two generations ago. Income Drawdown is as mainstream as annuity purchase, and so on.

    Of course, it will be appropriate to recommend a new financial product from time to time; my point is an IFA business model mainly built on those product sales is outdated and runs huge regulatory risks. Businesses built on the sale of ongoing advice far, far less so.

  19. Whatever your company produces is a product. It doesn’t matter if it is advice. Advice (ongoing or otherwise) is still a product. Increasing turnover means increasing the sale of what your company produces ie products.

  20. Hi Christopher, I’m pleased you put so much faith in auto enrolment, I reserve judgement on it to be fair ! (tongue in cheek comment)

    We also have a even bigger elephant in the room than “sales” pressure !, and that is “regulatory” costs and levies, interim and or other pressure ?
    These are becoming huge and personally I have signed a petition just this week on the very subject from Paul Beasley to Tracey McDermott, now we know the FCA are very happy to drive up costs to the consumer (they have acknowledged as much, that this is passed on) this in turn may and will, end up with some playing loose and fast with their advice and policy flogging ?

    Some peoples fees have increase by some 300%, now this has to be met, or by golly suffer the consequences !! now what do you do ? lose your livelihood or bend the rules ?

    The FCA cant and shouldn’t have it all ways, this is quite unacceptable and quite frankly a damn sight worse, than the leader board on the wall of your sales office, do you concur ?

    As a business owner (maybe like you) this is one of my major concerns , I don’t have the spare capital to invest in my business thanks to the FCA, my personal revenue is falling thanks to the FCA, and quite frankly I tired of being a financial slave to a unaccountable entity.

    Now if I was a business employing a adviser on (say) 40k a year, I would need to manage him to at least that expectation or sack him, its that simple, that is regulatory “cost” pressure form above, the source if you will, and sales pressure (to the employee) is the consequence at the end ?

    A criminal act is often carried out by some-one who has (in most cases) been driven to so by a external force, yet its the culprit and victims, not the source that suffer ?

    The FCA hide behind the statement “if you do nothing wrong you have nothing to fear” which in its self is one of the most strange quotes to make, as it implies you do have everything to fear, as fear is the dominant word !

    To end, we have a regulator that is so inherently prejudiced against the industry it over see’s, it is blind to the damage left in its wake.

  21. And so the Daily Telegraph boasts that it has teamed up with Skipton FS, or whatever they are called, and that their advisors will visit you in your own home and complete an in depth financial review etc. etc. You will receive tailor made proposals but you will be charged for the advice only if you proceed. I bet these advisors have sales targets, if that’s the only way a fee is received by the firm. I thought that this way of doing business was outlawed. Am I wrong?

  22. They’re not alone Mr Brydon, but whilst the FCA have stated publicly that they don’t like contingent charging, it is not “outlawed”.

    Another example is Santander. I read through their “about our services and costs” document a month or two ago – they only charge their fee if you invest and they do NOT offer an ongoing service. So in other words, they flog something then move on.

    If the FCA aren’t happy, why don’t they do something about it?

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