Bonuses paid to bank staff 'can encourage misselling'
Published 27/07/2014 | 02:30
Next time your bank tries to sell you something which you genuinely feel is a waste of money, trust your instincts.
The bonuses and perks paid to bank staff encourage them to sell products which are not in the best interests of consumers, a Central Bank inspection has found.
The inspection - which examined the pay, perks and bonuses given to sales staff in banks, insurers and investment companies - found there was a risk of misselling across all of the institutions examined. "Each sales-based incentive scheme carried the potential to encourage poor sales behaviours in sales staff," said the Central Bank in a report published last week.
"Most firms did not sufficiently use financial penalties or deterrents, other than clawbacks or deductions of initial commission earned, as a threat or mitigant against poor sales-related behaviours. A lack of sufficient disincentives or deterrents in incentive schemes for front office sales staff may increase instances of misselling."
Financial institutions are more likely to reward staff for generating a high amount of sales than for acting in the best interests of consumers, according to the Central Bank. Bonuses were often paid once a sales target was met, regardless of how well products were sold to consumers.
The Central Bank discovered "widespread use" of sales targets and 'accelerators', where staff get paid bigger bonuses the more they sell.
"Firms set targets based on the needs of the firm or individual seller, potentially to the detriment of consumers," said the report.
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