Incentive and target based sales techniques in banks and other financial services outlets to be investigated

News - Banking

Written by Ray Clancy

Friday, 26 March 2010 09:13

The culture of targets and incentives among sales staff at banks and other financial services providers is to come under scrutiny amid growing concern that it leads to poorer outcomes for both consumers and employees.

Financial services firms that force staff to promote and sell products to consumers in order to meet sales targets are expected to be overhauled as part of plans revealed in the budget this week.

A working group is to be set up to examine the whole culture of staff targets and incentives in the financial industry and what affect they have as part of the Treasury-led Retail Financial Services Forum.

The group will meet with a number of banks, consumer groups and trade unions, to discuss the need for reform, before reporting to the Chancellor.

One of the country’s biggest trade unions, Unite, welcomed the investigation into bank sales culture, describing it as a victory for staff in banks across the UK.

‘There is now an opportunity to eradicate the murky practices which put pressure on staff and customers. This new examination by the Government is a win for consumers and a win for those workers on the front line of the banking sector,’ said Rob MacGregor, Unite national officer.

‘Unite members feel uncomfortable with having to pressure customers to invest in products which they often don’t feel they need, simply because the staff have to meet unreasonable sales targets,’ he added.

TUC general secretary Brendan Barber also welcomed the move. ‘The impact of staff incentive targets on customers and employees has long been a concern for union members in banking. We welcome this new group and that unions will have a say on reforms,’ he said.

Consumer champion Which? said sales incentives within banks are the root causes of detriment to consumers. ‘Many people have said in our Future of Banking Commission sessions that they dislike the sales-based culture within banks, which is influenced by sales targets or commissions,’ said policy adviser Dominic Lindley.

Which? recently sent out mystery consumers to 37 branches of banks and building societies and found just four gave good advice to those investing a lump sum. It also found that 33 banks often recommended inappropriate products, failed to properly explain the risks or simply couldn’t get the basics of good advice right.

‘Banks and building societies need to buck up their ideas and make sure that their sales practices don’t exploit consumers by encouraging their staff to recommend inappropriate products,’ said Which? chief executive, Peter Vicary-Smith.

A spokesperson for the British Banker’s Association said they are not currently aware of any invitation to the new group on remuneration and incentives, but they will be pleased to participate if asked.