Conduct Risk & Commission Payments – Are the two fundamentally incompatible?

I am inevitably interested in how firms in the FinServ sector will satisfy the Regulator that they are operating in the genuine best interests of their customers, rather than simply ticking a box and focussing on the bottom line. Clearly some of the practices in the sector will need to change if firms are not to experience unintended consequences of otherwise good intentions.

Sales commission and performance bonuses are good examples of what might need to change. Don’t get me wrong, I am not “anti” commission or bonus and both have their roles in driving productivity in a (lets not forget) commercial, FOR profit, enterprise.

However, in my opinion, without adequate checks and balances it doesn’t take a rocket scientist to predict that in some instances employees will make decisions to the detriment of the customer to increase their commission/bonus. Of course they will. Equally, many employees will be ignorant of what they can and cannot do and inadvertently break the rules. A point highlighted by FCA comment on August 5th, about inadequate employee knowledge of Conduct Rules.

How then does a firm offer sales commissions and performance bonuses, but protect itself against the inevitable criticism of pressure groups and financial penalties when some or more employees bend and break the rules, or simply don’t understand how they apply to them in their role? The unintelligent answer is to ban sales commission and performance bonuses and then it can’t possibly happen. But that also removes 2 valuable performance “levers” from the enterprise toolkit.

Better surely to put adequate controls in place so that the likelihood of ignorant errors is significantly reduced and when an employee or a group of employees turn rogue, the employer can unequivocally prove they have taken all reasonable steps to prevent this occurrence.

Clever Nelly, the multi-award winning Artificial Intelligence from Elephants don’t forget is deployed in a new FinServ firm every week because Nelly guarantees that every employee learns and retains what they have been trained and understands how the regulations affect them in their specific role. In addition, Nelly provides Compliance & Risk Management practitioners with game-changing insight into current employee centric hot spots and risks so they can be pro-actively managed before they become a material issue.

Clever Nelly provides independent evidence that Senior Management has taken reasonable steps to ensure employees delegated work are fit and proper to conduct that work and perfect evidence that in the event that an employee goes rogue, that they did so intentionally and not as a result of any failings on behalf of the employer.

So if you want to continue to (safely) offer Sales Commission and performance bonuses in your firm, maybe it’s about time you joined the rapidly growing herd of firms in your sector that deploy a virtual purple elephant on their team? www.elephantsdontforget.com