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Foot Anstey: The FCA’s clear warnings on staff pressure tactics


The FCA has released finalised guidance on performance management for firms (FG15/10). This is aimed at all firms that have staff dealing directly with retail customers. It can be tempting to think that it applies only, or mainly, to banks and other firms with a vast direct sales force but the regulator has made it clear this is not the case.

In the opening section of the guidance there are several very clear messages, most of which should not take firms by surprise:

  • A poor culture starts at the top. It is therefore the responsibility of senior management to ensure that whatever performance management processes are used, they do not drive poor behaviours that in turn lead to poor customer outcomes.
  • Whatever performance management or incentive tools are used, they will inevitably drive behaviours by staff at all levels looking to optimise their performance in the eyes of the firm under those processes. Firms and their senior management should largely be able to predict this and should ensure that appropriate controls are in place to deal with it.
  • Form over substance: removing a direct link between “sales” and performance/remuneration will make no difference if an indirect link between the two persists through practices on the ground.

It is interesting to hear that much of the FCA’s work has been prompted by whistleblowing from staff within firms. This indicates that staff subject to poor performance management processes are aware of it and are choosing to do something about it, rather than just go along with it, as may have been the case before.

The flip side of this is that it could also indicate firms’ senior management are not getting the message, which is only likely to increase the FCA’s focus in this area. If staff at lower levels can see there is a problem, then the FCA would expect senior management to be aware of and dealing with it. If they are not and it comes to the FCA’s attention via whistleblowing, then senior management are likely to be very much on the back foot when they come calling.

If asked by the regulator, all firms should be able to demonstrate quickly and clearly that they are taking the following steps:

  • An analysis should have been undertaken of what risks a firm’s performance management processes are likely to generate. The firms should then decide if those risks are unacceptable or if they can be managed.
  • If a firm considers that the risks can be managed, they need to have decided how they will manage them, then do it and document it.

This is an exercise that all firms, if they have not done it already, should be looking at now. The process for ongoing monitoring of the risks should also be robust.

Another important point is the whistleblowing. As already mentioned, it appears a lot of the FCA’s work has been driven by such. If staff are whistleblowing to the FCA that must mean they do not feel they can do so internally, or that if they did it would not be taken seriously. This is a clear sign of poor internal culture. Firms should work on ensuring they have an open and supportive culture under which feedback from staff is proactively encouraged. This is a no brainer. It must be better for firms to seek this feedback internally than risk a member of staff going straight to the regulator.

Furthermore, firms have to show they then act on any potentially negative feedback from staff and take steps to address the issues raised. It is all pretty obvious stuff. The FCA wants to see firms completing the circle: good senior management attitude, risks identified and managed through appropriate procedures, open and supportive culture from top to bottom, regular reporting and feedback, and that feedback being considered and used back at the start of the process to tweak any areas where the firm is falling short.

One thing is certain: the FCA will not be letting up in its focus on this area. It is still not satisfied that firms are taking the issue seriously. Clear warnings and some very practical guidance is being offered to firms. It is now up to them to take up the mantle.

Alan Hughes is partner at Foot Anstey LLP 



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There are 7 comments at the moment, we would love to hear your opinion too.

  1. “It is interesting to hear that much of the FCA’s work has been prompted by whistleblowing from staff within firms. This indicates that staff subject to poor performance management processes are aware of it and are choosing to do something about it, rather than just go along with it, as may have been the case before.”
    or they are just lazy buggers looking for a way to justify getting a salary for doing nothing!

  2. There’s a blindingly obvious conflict here though.
    1) Firms, in order to remain viable, must make a profit
    2) For that to hold true, employees need to generate revenue that exceeds their cost
    3) Employees that fail that test will, sooner or later, have to be be dispensed with
    4) Employees will have that fact ‘made known’ to them (in any number of subtle ways)
    5) Employees will therefore act in line with their own interests (job preservation)
    6) Those may well be at odds with the interests of customers

    Just one more reason why I would never want to employ an adviser

    • Ivor, it’s the same in any business in the democratic world. But that doesn’t mean everyone is dishonest. What line of business are/were you in? I bet it had its fair share of rogues too.

  3. I wonder what Martin Wheatley’s take on this is, given that he got a bonus of £92,000 at around the same time as being told by George Osborne that his contract wouldn’t be renewed. If you work for the FCA, it seems you don’t actually have to accomplish anything at all of any demonstrable value to get a bonus. It’s just a matter of what’s in your contract. Or perhaps you do, but they conveniently overlook the various banana skins on which you happen to have come a cropper over the year past. Were the FCA not costing the industry hundreds of millions of pounds a year, Martin Wheatley’s claims to careful financial husbandry would be utterly laughable.

  4. Poor senior management leads to lack of performance due to lack of education or the right material to start with. @David Brookes, ‘lazy buggers’ shouldn’t be employed to look after the life savings and retirement goals of Clients. If you are a senior manager and you cannot interview properly get in someone who can.

  5. The issue of incentives is key.

    The problem is firms tend not to value staff who do not generate a return.

    Not sure what world the FCA inhabit.

  6. It is not hard to incentivise good practices that have ethics and quality aligned- you just don’t do it in a way that conflicts an advisor or is overly valuable- having worked under poor cultures the pressure can be intense, unhealthy and definitely drive poor practices. We now run our own business we wont go back there. Culture and work ethic plus a good recognition system and a focus on business performance that as a partnership to succeeding is much better solution- we need to forget about the old ‘sales’ days…but I agree the answer isn’t employing advisors…or anyone else for that matter- working with professional people is good enough.

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