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‘Lip service paid’ over sales incentives reform

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.

Following a probe of perform-ance 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 revealed 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 last 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 assess 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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