If you have read the news over the last couple of days you will have seen the recent press release regarding the clampdown on incentives. The BBC report states “The UK's financial watchdog is calling for a clampdown on commissions paid for selling insurance, loans and bank accounts.”
However this is not true!
The FSA website clarifies that it's excessive and unreasonable sales bonuses/targets that they are looking to clamp down on and specifically the way that banks and big financial institutions look to sell and cross sell to unsuspecting customers.
The media have used the word 'commissions' in the wrong context - but don't let the facts get in the way of a good story! The FSA have confirmed that they are not looking to ban commissions of the sort that our clients rely on.
The FSA has seen many different types of poorly managed incentive schemes that had a clear risk of benefiting sales staff and managers rather than customers. For example:
- One firm operated a ‘first past the post’ system where the first 21 sales staff to reach a target could earn a ‘super bonus’ of £10,000.*
- Basic salaries for sales staff at one firm could move up or down by more than £10,000 per year, depending on how much they sold.*
- Another firm excessively incentivised one product over another, therefore – despite claiming to offer impartial advice – there was a clear risk that its advisers would sell the product that earned them more money. The FSA also found that the same firm made more money from sales of that particular product than any other, hence the bigger incentives for sales staff.*
- One firm allowed sales staff to earn a bonus of 100% of their basic salary for the sale of loans and PPI, but the bonus was only payable to those who had sold PPI to at least half their customers. * (source FSA)
Most firms we deal with don’t offer these types of schemes and its generally seen with larger firms with big sales targets, if however you offer a similar type of incentive scheme and want to know if it would be deemed inappropriate please get in touch and we can deicide if action is needed.