The FSA crackdown on poor incentive schemes sees a welcome shift in regulatory focus to address a major systemic problem which has been ignored for too long.
A warranted criticism of the FSA’s retail agenda has been its failure to get to grips with an unhealthy sales culture within many banks, which has led to a raw deal for huge numbers of consumers. Compare this with its heavy-handed treatment of the, mostly, much smaller issues in the IFA sector.
Two messages in particular stood out from Financial Conduct Authority chief executive Martin Wheatley’s speech last week. First, he called for a change in behaviour “from boardroom to point of sale”.
The incentive schemes and pressures applied on bank sales staff emanate from the top of these organisations and that is where the blame should lie. Looking back at bank advice misselling scandals in recent times, for instance, Barclays’ advice failings around the Aviva funds, Credit Suisse’s structured product misselling and Coutts’ sales of AIG products, no senior management were held publicly accountable for the failures.
Until those at the top are punished for the behaviour of the staff carrying out their orders in the branches, it is difficult to see how Wheatley’s proposed banking renaissance has any chance of becoming a reality.
Incentive schemes are, of course, not being outlawed and they will continue to be the backbone of many firms’ business models. But some of the startling examples uncovered by the FSA emphasise the rotten culture that senior staff have allowed to develop below them and the need for regulatory action.
Alongside a firm crack of the whip, it was great to hear a senior regulator use such a speech to emphasise the need for people to save more and protect themselves and their families and the dangers to individuals and society of not doing so.
Without trust and confidence, you are never going to convince an already cynical public to engage with financial services.
But this overhaul of dodgy sales practices should accompanied by a debate about how to ensure a healthier regulatory balance between protecting people from misselling and the real dangers to consumers and their families of not saving or buying protection. Regulatory policy has for too long been warped by a failure to acknowledge the latter.