The increase in regulatory and congressional scrutiny on financial sales incentive practices should cause every retail bank and compliance leader to review their sales practices performance management and incentive programs for potential Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) issues.
The response should come from the very top of the organization, where bank boards and executives set the tone and define the culture that will determine how consumers are treated. The impact will cut across sales, service, and safety and soundness—all of which are due for risk management review in light of current circumstances. Business goals can and should be met within a consumer-oriented culture—a message to be conveyed at every level of retail banking. Thorough consumer needs assessments should be vetted prior to product recommendations.
Strong Compliance Management System (CMS) programs will include the following elements for sales incentives:
- Formal governance structure, policies, practices, and processes
- Strong statement of fair consumer treatment within the institution’s written sales practices program
- Risk assessments
- Easily understood and auditable incentive goals with clear performance targets
- Periodic reviews to determine that the actual sales culture matches the written program
To best prepare for regulatory scrutiny:
- Be proactive with internal evaluations
- Prioritize a retail performance management internal audit
Conduct an independent review
Treliant’s experienced compliance and retail banking professionals can help craft strong sales incentive programs that meet bank sales goals while incorporating strong risk management principles.
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