A thematic review from the FCA has warned that poor use of financial incentives and targets can lead to mis-selling.
According to a 15-page document, called Risks to Customers from Performance Management at Firms, published by the City watchdog, there is still a “sales-focused” culture in some parts of the financial services sector.
The FCA has recommended that firms provide sales targets that focus on consumer outcomes as much as figures.
It has also said senior managers should ask staff about their firm’s culture and maintain good relationships with unions and trade bodies.
In the document, the FCA stated: “We have seen an increasing level of intelligence about poor performance management practices during 2014.
“While we have not identified evidence of widespread issues, we have identified instances of poor practice through taking action on intelligence from whistleblowers at some firms as part of our firm supervision.
“Despite the benefits of good performance management, there will always be an inherent risk that poorly executed performance management can encourage or drive mis-selling because of pressure to meet individual targets, and/or corporate plan objectives.”
Adrian Murphy, a partner at Glasgow-based Murphy Wealth, said: “I am not sure it is as big an issue as it was previously.
“In an independent firm there is no benefit to selling one product over another, but in a tied environment it might be more of an issue.”