Final guidance aimed at stopping financial firms from running incentive schemes that encourage mis-selling was published by the Financial Services Authority (FSA
) on 16 January 2013.
A review on the issue, which was published by the FSA in September 2012, examined the use of sales incentives and applied to insurers, banks, building societies and investment firms. Feedback on the proposed guidance was requested and the final guidelines, entitled 'Risks to customers from financial incentives
', provide clarity on some of the issues raised by respondents as well as presenting further examples of good and bad practice.
The guidelines focus specifically on areas such as how incentive schemes may encourage people to mis-sell, how easy it is to understand the schemes, whether firms monitor their sales staff adequately, and whether sales managers may encounter a conflict of interest between earning a bonus and ensuring that staff behaviour meets expectations. The FSA's managing director Martin Wheatley, said that "finalising this guidance is important because it gives financial firms a clear idea of what we expect from them and how they should manage their incentive schemes. It also marks a key step in changing the culture of viewing consumers as a sales target to somebody to serve
The new guidelines will apply to all firms that deal with consumers and offer incentive schemes for their staff. The FSA has said that it will continue its ongoing review of sales incentives and will put measures in place in order to check whether firms are complying with the guidance.
A copy of the final guidance can be viewed here