On 16 March 2015, the FCA published a guidance consultation on proposed guidance on risks to customers from performance management at firms. The consultation also included the FCA’s findings from its thematic review in this area.
Following its consultation, the FCA has now published Finalised guidance 15/10: Risks to customers from performance management at firms – Thematic review and guidance for firms (FG15/10). FG15/10 contains guidance that suggests ways that firms can manage the risk of mis-selling being driven by poor performance management practices. It also sets out some examples of good and poor practice.
Summary of the findings in FG15/10 include:
- the FCA have seen an increasing level of intelligence about poor performance management practices during 2014. While it has not identified evidence of widespread issues, the FCA have identified instances of poor practice through taking action on intelligence from whistleblowers at some firms;
- firms need to manage this risk and should pay particular attention to identifying poor practices that may create an undue level of pressure on staff, which is likely to further increase the risk of mis-selling;
- middle managers are particularly likely to have to manage conflicts of interest to avoid poor performance management practice;
- the continuous interactions between different levels of management and with frontline sales staff, which are often not documented, can present the greatest risks and are areas where poor practice may be hidden from direct view;
- the way sales targets are calculated, and the levels that are set for individuals or teams, is also an important factor in how much pressure staff can be placed under to deliver sales results; and
- firms need to be aware that, even where sales staff do not have individual sales targets, pressure on middle management to deliver sales results can and does have a big influence on the behaviour of frontline staff.
The FCA expects firms, with staff who deal directly with retail customers, to read FG15/10 and take actions where appropriate to ensure the risks are adequately managed.
View FG15/10 – Risks to customers from performance management at firms, 27 July 2015