The FCA has published Thematic Review 14/4: Risks to customers from financial incentives – an update. In this report, the FCA summarises the findings of its follow-up thematic work into financial incentives which assessed whether firms are now managing the risks to consumers.

The report follows an extensive review that the FCA conducted which looked at incentive schemes for sales staff across all types of firms. The FCA also looked at controls firms are using to mitigate the risk of mis-selling from their incentive schemes. This work included on-site assessment of incentive arrangements at all of the largest retail banks.


The FCA states that it found significant change with increased awareness and focus on financial incentives. In particular, it found that all of the largest retail banks had either replaced or made significant changes to their incentive schemes to reduce risk to customers. They had also improved their controls. However, the FCA also found that there was more to be done. It estimates that around one in ten of the firms with sales teams had higher risk incentive scheme features where it appeared they were not managing the risk properly at the time of the assessment. Common areas where some firms need to do more to manage incentive risks effectively include:

  • checking for spikes or trends in the sales patterns of individuals to identify areas of increased risk;
  • monitoring non-advised sales to ensure staff who are incentivised to sell do not give personal recommendations; and
  • improving oversight of incentives used by appointed representatives.

Next steps

At this stage, the FCA is not proposing to make any changes to its rules but warns that financial incentives will remain on its agenda in 2014. It will continue to focus on financial incentives through its supervision of firms because it is an important area of inherent risk. It will also carry out work looking at the related area of how firms manage the performance of their sales staff and whether pressure put on staff increases the risk of mis-selling.

View The FCA publishes latest review of sales incentives at retail financial services firms, 4 March 2014

View TR14/4 – Risks to customers from financial incentives – an update, 4 March 2014