Today Martin Wheatley, future head of the Financial Conduct Authority, announced how he will tackle poorly designed incentive schemes that can see banks selling products you don’t need. He’s here to tell us why…
Why is it that every time I walk into the bank to do something simple, the person behind the counter asks me if I would like to extend my credit, take out more insurance or look at their competitive mortgage rates?
When did this happen? Banks for me used to be a service – a place where you would go in, have a pleasant chat with the clerk and go about your daily business. Some time ago, this changed – financial institutions have changed their view of consumers from someone to serve, to someone to sell to.
We, as the regulator, intend to change this culture of viewing consumers simply as sales targets and I’m going to be personally involved in getting this right. This will be part of the ongoing improvements we make to regulation as we seek to make markets work well and give people a fair deal.
Incentive schemes drive bank mis-selling
Bank’s CEOs are ultimately accountable for the way their staff are incentivised, so we expect them to take a real interest in fixing this.
The bonus-based approach has played a role in many scandals we have seen over the years. Incentive schemes on payment protection insurance (PPI) were rotten to the core and made a bad problem worse.
I expect those running firms to start looking at what their schemes are set up to do. The dictionary tells us incentives are something that incites an action, so firms need to ask what type of action it is they incite. Is it to get the best deal for the customer, or is it to get the best deal for the person or firm selling it?
I want to draw a line in the sand here, and use the report we are publishing today to set out our expectations.
What we found is not pretty. Most of the incentive schemes we looked at were likely to drive people to mis-sell in order to meet targets and receive a bonus, and these risks were not being properly managed.
Tackling bank sales incentive schemes
Today marks the start of a programme of work to reduce these risks, which the FCA will take forward. This will involve further supervisory work, a wider review of incentive schemes, enforcement proceedings, and a possible strengthening of our rules.
We know this isn’t an easy job and we can’t do it alone. Making such a change is going to take time and so today I am asking senior bankers, compliance officers and consumer groups like Which? for their support.
Ultimately, banks need to make these changes for you, their customers, so that you’re happy and ultimately their businesses will do better.
Do you get annoyed by bank staff trying to sell you products you don’t need or can’t use? Do you think changing the way sales staff are incentivised will help you get a fair deal?
Which? Conversation provides guest spots to external contributors. This is from Martin Wheatley, managing director of the FSA and future head of the FCA – all opinions expressed here Martin’s own, not necessarily those of Which?