Cultural shift from sales targets
It might be said that one of the outcomes of the financial crisis is that public trust in financial institutions and in particular retail financial services products has deteriorated.
Recently the FSA published a speech by its managing director and chief executive designate of the FCA, Martin Wheatley, who has raised concerns that a reward culture has developed among staff within financial institutions which is directly contributing to mis-selling to consumers across the industry. In particular Mr Wheatley suggests that there is a culture of viewing consumers simply as sales targets.
To explain the development of this culture Mr Wheatley points to defective reward-based approaches that have played a part in a number of scandals that have arisen in recent years (notably PPI). To address the damaging role that such scandals have played Mr Wheatley calls for a cultural shift across the industry to deal with the risk of mis-selling.
The FSA has told firms that it expects them to take action now to deal with any flaws identified in their rewards system and are expecting chief executive and top level management to take the lead in fixing this problem within their organisations. This is a tough ask for firms as the culture of consumer care that the FSA is looking for cannot be delivered overnight. It also requires the firm to undertake a considerable amount of work by questioning the action it has taken and asking itself whether it is designed for the benefit of the consumer or for their bottom line. In addition to facilitate such a cultural change a number of other issues need to be addressed including the training of staff.
Once the reforms to the UK financial services regulatory structure are put into place early next year, the FCA will be assuming responsibility for this initiative and their work will involve further supervisory work, enforcement proceedings and a possible strengthening of rules. It seems to me that this initiative will gather pace and the message is clear - consumer interest needs to be put at the heart of a firm’s operating culture.
It seems to me that this initiative will gather pace and the message is clear - consumer interest needs to be put at the heart of a firm’s operating culture
Simon Lovegrove is a lawyer for the law firm Norton Rose