That is the message from some advisers who have worked within a structure of league tables, weekly targets and coveted prizes for boosting sales, and from industry commentators who have flagged concerns about such structures.
One adviser from a large advice network, who wished to remain anonymous, told FTAdviser the focus at their network was “all about the shareholder” and “never about the clients”.
They said: “It really is money, money, money. It’s never for the client. It’s not an advice practice: it’s all about banging the sales drum.”
The advisers said incentives made them feel like a “car salesperson” and made their “skin crawl”, while internal rankings of employees created a “dog-eat-dog culture”.
Richard Smith, a former IFA who now runs financial education company the Finance Zone, agreed, claiming any structure of perks and incentives driven from sales was “just a re-jig” of the old commission model the Financial Conduct Authority had moved away from.
He said: “Any reward should be away from product sales and more about compliance and customer outcomes. Extra money for sales causes real problems, as you can see with some advisers chasing defined benefit transfer business.
“Financial planners should be paid based on the quality of advice. At some point, the regulator will have had enough.”
Another IFA known to FTAdviser said they had left a different network because of a toxic sales culture. They said: “It was obvious the environment was engineered for repeated incentives to encourage sales. There was no reward for client satisfaction, no thought of what may be best for customers, and an active steer towards its own, expensive fund range.”
The adviser said sales-focused incentives and internal ranking tables had not resulted in good customer outcomes.
But Keith Richards, chief executive of the Personal Finance Society, said: “There has been little evidence produced to support [the claim] that recognition and reward structures ultimately lead to client detriment and there is no reason why they should – unless of course those individuals being incentivised deliberately choose to do the wrong thing to achieve [rewards].
“It is important however to recognise such initiatives can be negatively viewed, or even attract the attention of regulatory scrutiny.
“Bonus schemes are a common feature in most sectors but regulated financial advisers follow a comprehensive process, often involving other checkpoints, to ensure they are making recommendations of suitability based on the individual needs of their client, so an incentive alone is unlikely to lead to a poor outcome.”
Incentives for advisers have come under scrutiny lately after St James’s Place was found to be offering its advisers cruises as a reward. The reports led the FTSE 100 company to review its perks and incentives culture and it has since announced an overhaul of the regime.
More recently, national advice company Chase de Vere came under fire after it was accused of rewarding its best-selling advisers with a trip overseas.
However, Chase de Vere has disputed claims its conference was sales focused and its business was target driven, saying it was focused on client outcomes.
Of the large advice companies and networks that responded to Financial Adviser’s questions, Tenet was the only network that did not offer some form of incentive based on financial measures, sales or new business.
Among other firms and networks who responded to our questions, Quilter Private Client Advisers said salaried advisers can earn 10 per cent of their fee income annually, although this is contingent on quality and customer outcome measures being met.
Similarly, all staff at both Tilney and LEBC are salaried but eligible for a bonus partly based on financial measures and income generated. Both firms said measures such as client outcome, compliance and behaviour were also taken into account.
Despite the recent shake up of its perks culture, the rewards and recognitions programme at SJP is still partly based on sales. The new system also considers factors such as charitable work and customer retention.
Meanwhile firms within Quilter’s network are offered loans to support new firms transitioning into the business — some of which can end up being non-repayable if a firm’s business plan meets a certain standard.
At national network Openwork, the larger the total revenue a firm generates the lower the level of percentage fee split they are charged.
On top of this, Openwork offers an enhanced service proposition to the firms and advisers with the highest revenues. This can mean a quicker response time from the network’s compliance team and a slightly more “concierge” service from Openwork’s resources.
Tenet does not offer some form of incentive based on financial measures, sales or new business, but it does, however, use a ‘Leading Lights’ league table to celebrate advisers and firms who had both good productivity and positive customer outcomes.
Quilter’s network also distributes league tables to regional managers — which they can pass on at their own discretion — while annual business productivity tables, which rank each firm in Quilter’s network, are available online.
Tilney, LEBC or Openwork said they did not use league tables while Sanlam and Succession did not respond to any of FTAdviser’s questions.
imogen.tew@ft.com
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