The paper, FG15/10 – Risks to customers from performance management at firms, which follows a consultation in March, has been issued to offer firms tactics to better manage staff and ensure stronger consumer outcomes.
The practices are not widespread, the regulator confirmed, and some pressure is not unexpected, but an ‘undue level of pressure’ means there is more work to do to stamp out the culture of sales in financial services.
The report, drawn from industry whistleblowers, media reports and industry consultation, is aimed at all firms in retail financial services, including smaller firms which sell products or provide a service, including advisers and networks with appointed representatives.
Intensive micro-management of sales results, staff made to continuously report those results, sales communications that put staff under undue pressure and promotions based on sales results are just a few of the problems identified by the regulator.
The regulator highlighted middle managers as being under particular pressure to balance objectives linked to the firm’s corporate plan with the way products are being sold and ensuring staff behaviour is appropriate.
It said the continuous, sometimes undocumented interactions between different levels of management and frontline sales staff can present the greatest risks and where poor practice may be hidden from direct view.
It added that the ‘tone from the top’ may be good but this doesn’t always translate into the day-to-day running of the business, in particular from the middle management level down.
Following a consultation in March, in its one-minute guidance, the FCA recommends customer-facing firms:
• have objectives for sales staff that are more balanced and include sufficient ‘how’ or behavioural measures, including consumer outcomes, as opposed to just the ‘what’ (e.g. sales results)
• monitor communications about sales results and records from formal procedures, such as appraisals, to look for signs of undue pressure on advisers or other staff
• put together a range of information to pro-actively create a picture of where undue pressure on staff might be occurring, and
• undertake increased monitoring where areas of increased risk are identified.