MoneySavingExpert.com founder Martin Lewis has argued problems within banks’ sales cultures go beyond incentives and stem from poorly trained staff “dressed up as advisers” who do not have the “moral compass” to know they are misselling.
The FSA has today published a review into the sales incentive schemes of banks, building societies, insurers and investment firms following a year-long investigation. It found 20 out of 22 firms ran incentive schemes that increased the risk of misselling. One firm has been referred to enforcement as a result.
Financial Conduct Authority chief executive Martin Wheatley, who has led the FSA’s incentives investigation, said incentive schemes have played a role in several recent misselling scandals including payment protection insurance.
Launching the report this morning at a Thomson Reuters event in London, Wheatley said: “Poorly designed incentive schemes are a problem across many industries. Financial regulators have struggled to get to grips with them and many consumers have paid the price.
“We know that dealing with this will not be an easy task. Financial incentives are in many cases central to how businesses operate, and they are at the heart of the problems that have been deeply ingrained in firms’ business models for many years. We need a cultural shift right across the industry to address this.
“Whilst we are looking at our rules and the way we supervise, we expect firms to act now to clean up their act in response to our findings.”
Responding to Wheatley’s speech at the event, Lewis (pictured) said the FSA’s work on incentives represented “a real step change in regulation” but said the challenge will be in delivering such a significant culture change within banks and the wider industry.
He said misselling risk was posed not just by reward schemes but a number of other factors such as the lack of consumer financial education, the poor quality of sales staff and their lack of adequate training.
Lewis argued risks of misselling are exacerbated by “staff who are poorly trained, poorly paid, and who do not even know that what they are selling is wrong. It is not just the incentive. It is the fact that they do not have a ‘moral compass’ to know they are misselling.”
He added: “Many staff within financial services, especially bank staff, are positioned as advisers but they should be called salespeople. This is absolutely crucial. We know they are incentivised to sell, not to advise. If we have to live with that please do not less us dress this up as something it is not which just confuses people.
“Unless we start to crack down on this idea that is all about the sell, sell sell, and not about giving people the right products, then I will standing here in 10 years time saying do not trust your bank.”