This report summarises the findings of our follow-up thematic work into financial incentives which assessed whether firms are now managing the risks to consumers.
August 2025 update: This review is historical. See our what we publish[1] page for more information and current views.
Who should read this paper?
This report is aimed at all firms in retail financial services, including smaller firms, with staff who are part of an incentive scheme and deal directly with retail customers, and some small and medium enterprise (SME) customers, where relevant. Trade associations, consumer bodies and consultancy firms may also be interested.
Our findings are relevant to all types and sizes of firms, but where there is information relevant to certain firms this is clearly signposted.
TR14/4 – Risks to customers from financial incentives – an update[2]
What was the scope of the review?
We have carried out an extensive review of incentives schemes for sales staff across all types of firms. We have also looked at the controls firms are using to mitigate the risk of mis-selling from their incentive schemes.
What were our findings?
Our intervention to date has resulted in significant change and we welcome the increased awareness and focus on financial incentives.
Although we have seen considerable improvements, around one in ten firms with sales teams had higher-risk incentive scheme features where it appeared they were not managing the risk properly at the time of our assessment.
Most firms with incentive schemes had some improvements to make, for example, in the way they use management information (MI). Almost all of the large and medium-sized firms involved in this work have confirmed to us that they have, or will have, completed improvements by the end of March or shortly thereafter.
The examples included in this report are consistent with existing guidance which has already undergone consultation.
What are the next steps?
We expect all firms, including those that have already been given individual feedback, to:
- Consider this publication.
- Take appropriate action now, including building on what they have already done, to ensure they are managing the risks of mis-selling from financial incentive arrangements.
- Read or re-read our guidance, where necessary.
Given the progress made, we are not proposing any changes in our rules at this time but financial incentives will remain on our agenda in 2014.
We will continue to focus on financial incentives through our supervision of firms because it is an important area of inherent risk.
We will also carry out work looking at the related area of how firms manage the performance of their sales staff and whether pressure put on staff (through, for example, sales targets) increases the risk of mis-selling.
How can I find out more?
- One-minute guide: Risks to customers from financial incentives – an update
- Finalised Guidance: FSA FG13/1 – Risks to customers from financial incentives[3]