DA firms urged to review incentive schemes with new tool

Following the FCA’s finalised guidance FG13/1 – ‘Risks to customers from financial incentives’ issued last year, a further update was published in March 2014 with the FCA’s Thematic Review TR14/4. This set out the regulator’s findings following assessment of the changes firms have implemented.

The FCA’s guidance has increased the pressure on firms to ensure that their incentives culture does not lead to poor outcomes for consumers. In response, Bankhall has launched a financial incentives assessment tool to help directly authorised firms identify any potential areas of concern. The tool and supporting guidance is designed to provide an initial assessment based on the scheme features which may pose a risk, and highlight any potential gaps in a firm’s systems and controls.

The resulting document can be retained to help evidence to the FCA that the firm has assessed the risks and put measures in place to manage them, ensuring that customers’ interests are protected.

Linda Preston-Todd, Head of Operations at Bankhall, says:

“Whilst progress has been made, the FCA warned in its findings that some smaller firms have not fully understood that policies and agreements they have in place could be considered to be an incentive.

“Financial incentives will remain high on the FCA’s agenda in 2014 and form part of its supervision programme. That is why it is important for all firms, regardless of size, to demonstrate that they have reviewed their scheme and taken action where appropriate. This will ensure that firms’ financial incentives policies do not pose any risks to customers. The FCA will be looking to see whether any improvements made become part of a firm’s culture, and that there is a clear change in relation to the financial incentives provided to its staff.”