Thursday, 6 September 2012

Against incentive pay schemes

A new report out from the FSA does a rather good job in showing what the problems are. From the blurb -

  • Most incentive schemes were likely to drive people to mis-sell and these risks were not being properly managed;
  • firms failing to identify how incentive schemes might encourage staff to mis-sell, suggesting they had not properly thought about the risks or simply turned a blind eye to them;
  • firms failing to understand their own incentive schemes because they were so complex, therefore making it harder to control them;
  • firms relying too much on routine monitoring of staff rather than taking account of the specific features of their incentive schemes;
  • sales managers with clear conflicts of interests, such as a responsibility to manage the conduct of sales staff whilst themselves able to earn a bonus if their team made more sales; and
  • firms not doing enough to control the risk of mis-selling in face to face situations.

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