Martin Wheatley, Managing Director at the Financial Services Authority (FSA) has said that commission-based sales have goaded British banks to mis-sell financial products to customers and hence sales of financial products should be made commission-free.
Wheatley opined that most of the times, “poorly designed incentive schemes” force banking personnel to sell products that the customers do not need or cannot use, while profiting the banks with increased sales.
“Why is it that every time I walk into the bank to do something simple, like pay my credit card bill, the person behind the counter asks me if I would like to extend my credit, take out more insurance or look at their competitive mortgage rates?”, he questions, almost sounding frustrated.
“When did this happen? Banks or me used to be a service – a place where you would go in, stand in a queue, have a pleasant chat with the clerk and go about your daily business. Some time ago, this changed – financial institutions have changed their view of consumers from someone to serve to someone to sell to”, Wheatley says.
Martin Wheatley said that the incentive structure needed a major makeover but before that he stated that the basic attitudes of the top brass needs to be revolutionised to implement such reforms.
The FSA MD reviewed the rewards structure in banks for sales staff to make banks, investment firms and insurers to sell products to people based on their needs and not based on the profits that the companies could earn from them.
British banks have come under the scanner for over 20 years for selling unsuitable financial products ranging from loans to pensions to customers who did not need them.