The Financial Conduct Authority (FCA) is carrying out a thematic review of sales incentives within a broad range of consumer credit sectors and firms where consumer credit is secondary to their main business. But what does this mean for incentives schemes already in place and going forward?
“The purpose of our review is to understand the nature of staff incentives, remuneration and performance management arrangements in the consumer credit market. We will focus on the risks that can arise and how firms control and mitigate those risks. We will seek to examine good and poor practices,” said the FCA.
The FCA implements, supervises and enforces regulations within the financial markets (including insurance, mortgages and consumer credit). The FCA “ aim[s] to make sure that financial markets work well so that consumers get a fair deal ” A lot of their focus recently has been directed at sales incentives schemes and ensuring that the consumer is given a fair deal. In particular, the use of sales incentives to ‘upsell’ products or add-ons that the customer doesn’t necessarily want or need.
Remember “TCF”
The FCA promote an acronym that should be at the forefront of anyone managing a sales incentives scheme “ TCF ” - treating customers fairly. Managing an incentives scheme for employees that rewards sales do come with risks. The onus is now on companies to carefully consider the implications of each scheme and reward system to ensure the fair treatment of customers. They should aim to be rewarding customer service rather than straight sales figures.
Future of Sales Incentives
Sales incentive schemes are not going to be axed from the repertoire of ambitious retailers - far from it, they will evolve and adapt to fit any new guidelines. If the targets are set high and rewards are equally high, this is likely to attract the unwanted attentions of the FCA. Rather, focus on a little and often approach, with incremental rewards, with added customer service incentives. Take into account the company values whilst setting up an incentive scheme.
What You Can Do Right Now
It is better to pre-empt new guidelines and regulations rather than risk incurring penalties later on. It is all common sense - if your current incentive scheme may be doing harm to customers, through aggressive sales, rethink it.
Take the FCA Advice
“It is particularly important that incentives are structured in a way that rewards behaviours that act in the long-term interests of consumers, rather than creating conflicts of interests that, for example, may encourage staff to sell unsuitable or unwanted products to consumers. There is a continued need for firms to consider the impact their incentive structures and other performance management tools may have on behaviours and the steps they need to take to adjust these.”
We would advise that all sales incentive managers, not just those within the financial sector, take to heart this advice. Whilst it is important to reward and incentivise staff, it is equally important to consider the consumer within this. To find out more about sales incentives and how we have helped to implement them within some very well-known brands, click here.