In an official update, the FCA said that while many firms had improved their sales incentives since September 2012, with some ditching bonus schemes altogether, it was not convinced these new working practices would endure if they resulted in firms’ profits being hit.
The FCA also warned that some new discretionary bonus schemes were not balanced and while they did not automatically reward investment and protection sales they could still drive mis-selling.
FCA chief executive Martin Wheatley said: “A large number of firms are changing the way they reward sales staff and advisers to drive better behaviour. We have also seen improvements in the way firms monitor the bad behaviour of staff, and this is encouraging.”
But he warned: “Firms can’t sit back and assume everything is working as it should. They need to be vigilant to ensure poor practices do not return.”
The FCA also cautioned that self-employed advisers who receive variable remuneration from fees, income or commission were affected by the guidance and should “understand and manage the risks of mis-selling”.
Nick McBreen, IFA at Truro-based Worldwide Financial Planning, said: “I think advisers should not ever be recommending anything other than the most appropriate product to customers. That’s what the RDR was supposed to do. But I worry banks’ so-called advisers are still driven by sales targets they have to meet or they will face the sack.”