In March 2015 we consulted on proposed guidance to help firms mitigate the risks that are posed to consumers by inappropriate performance management practices in firms.
We have now finalised this guidance, which is relevant to all firms with staff who deal directly with retail customers and some small and medium-sized enterprise (SME) customers, where relevant.
Firms with staff who deal directly with retail customers should read this report and take action where appropriate, to ensure the risks are adequately managed.
Summary of findings
We have seen an increase in the level of intelligence about poor performance management practices in sales areas. We have not identified evidence of widespread issues, but we have identified instances of poor practice through our follow-up work on whistleblowing reports.
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 targets and/or corporate objectives. Whilst some pressure is not unexpected, an undue level of pressure is likely to further increase the risk to customers.
Middle managers are particularly likely to have to manage conflicts of interest, where they often have to balance their objectives linked to sales results with other objectives, such as the way products are being sold.
It is not our role to prescribe how firms manage the performance of their staff, but we expect firms to manage the risk of mis-selling effectively, including identifying where poor performance management practice may be leading to undue pressure.
Finalised Guidance 15/10 [PDF]
Summary of feedback received
Respondents were very supportive of the report and guidance and generally thought that it would be helpful to firms in identifying poor performance management practices and managing the mis-selling risks that can arise in this area.
Some minor changes have been made to provide further clarity in a small number of places.
- In March 2014, we published our thematic report into financial incentives, which assesses whether firms were managing the risks to consumers.
- How we handle disclosures from whistleblowers
- Final guidance FSA13/1: Risks to customers from financial incentives