by Mark Johnston
Due to the recent problems with the mis-selling of payment protection insurance, which ended with a £9 billion compensation bill, the Financial Service authority (FSA) has been looking in to how bonuses and incentivisation programmes affect how sales staff works and the kind of products they are recommending.
A British Bankers Association (BBA) spokesman said “bank staff are employed on a salaried basis and performance is measured on a wide range of criteria, including appropriateness of products sold and levels of customer satisfaction”.
However, the financial Service Authority (FSA) has still undertaken a year long investigation in to the incentive schemes operated by 20 of the country’s biggest banks, insurance companies and building societies.
The watchdog is to issue a damning verdict on the way staff at financial service companies are encouraged by these schemes to pressure customers in to buying inappropriate products.
High margin, low value products from which banks in particular can make large profits are used in incentive schemes.
One staff reward scheme uncovered by the investigation meant that for every five loans arranged by an adviser, four had to be made along with a payment protection insurance sale. Should advisers miss this target they lost all their incentives, thus increasing the pressure on them to sell irrespective of whether it suited the particular customer.
The investigation also showed that some staff had to ‘pledge’ how many deals they were going to write at the beginning of the day, with out having a real handle on the customers they were likely to see that day.
It therefore seems that there is a ‘bullying’ culture in the financial industry, were employees are pushed in to a corner and therefore have to resort to any tactic to make a sale regardless of whether it is suitable or not.
Keith Richards, Tenet group distribution and development director said “this issue has been raging for years and sadly some with in the banking sector have adopted aggressive sales processes”.
Syndaxi charted financial planners managing director, Robert Reid suggested that “vulnerable people are getting ripped off and this needs to stop”.
Nick Cann, chief executive of the Institute of financial planning added “we do not want the financial planning profession tarnished with this kind of practice. There is no ethical behaviour; it is driven by the fact every customer has to have a product because that is the way staff are remunerated”.
Some experts feel that these incentive schemes are simply not compatible with giving financial advice and therefore financial advice will never be taken seriously as long as these practices continue.
Therefore in light of this the Financial Conduct Authority’s (FCA) chief executive Martin Wheatley has been called on to ‘stamp his authority’ on the industry by putting an end to banks aggressive sales incentive schemes.
Many believe that the report from the Financial Service Authority (FSA) is unlikely to result in any new rules or guidance as the regulator themselves hopes firms will make voluntary changes to their schemes.
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