The fine relates to inappropriate use of incentives and bonus structures in branches of Lloyds TSB, Bank of Scotland and Halifax – part of BofS between 2010 and 2012 – where staff were put under pressure to hit targets or they faced the threat of being demoted.
In one instance, an adviser sold himself, his wife and a colleague protection products to hit his required target.
The fine was increased by 10% due to the FCA’s repeated warnings over the misuse of incentive schemes, and because Lloyds TSB was a repeat offender, having been fined in 2003 for the unsuitable sales of bonds.
That said, the firms agreed to settle early, qualifying for a 20% discount, without which they would have been fined a total of £35,048,556.
Tracey McDermott, FCA director of enforcement and financial crime, said: “The findings do not make pleasant reading. Financial incentive schemes are an important indicator of what management values and a key influence on the culture of the organisation, so they must be designed with the customer at the heart. The review of incentive schemes that we published last year makes it quite clear that this is something to which we expect all firms to adhere.”
She said that customers had a right to expect better from the UK’s leading financial institutions and expected staff to put customers’ needs for first – impossible if incentives encouraged staff to address their own interests ahead of customers.
“Both Lloyds TSB and Bank of Scotland have made substantial changes, and the reviews of sales and the redress now being made should right many of these wrongs," she added.
The FCA found that both firms had higher risk features in their advisers’ incentive schemes which were not properly controlled, which created significant risks that advisers would maintain or increase their salaries, and earn bonuses, by selling products to customers that they did not need or want.
The investigation focused on advised sales of investment and protection products sold between 1 January 2010 and 31 March 2012.
Lloyds’ incentive schemes rewarded advisers through variable base salaries, individual and team bonuses and one-off payments.
