The ABA, in a media release has responded to the paper which has been released, and which questioned whether good customer outcomes and product commission payments were possible. It warned that the use of upfront and trailing commissions and their effect on incentivising sales may potentially lead to poor customer outcomes.
The Australian Bankers’ Association has today welcomed the release of Mr Stephen Sedgwick’s issues paper from his independent review into commissions and payments made to bank staff and third parties.
“Banks want to ensure that they pay their staff to do the right thing by customers, and we will work on any areas that need improving,” ABA Executive Director – Retail Policy Diane Tate said.
“This review is part of an industry-wide look at some of the influences on culture in banks, such as leadership and people and performance management.
“In recent years banks have made changes to remuneration practices to place more of an emphasis on good behaviour rather than sales targets, in light of changing community expectations and regulatory requirements; however there is more to do.
“It is important that banks get the balance right between rewarding employees and getting the best results for customers.
“Banks have committed to changing or removing payments that could lead to poor customer outcomes,” she said.
“Importantly, the issues paper has not identified systemic issues warranting the outright banning of product based payments. However, the paper does highlight the importance of culture, good governance, performance management systems, compliance checking, and communications across the organisation and by management, as all related to remuneration.
“The ABA looks forward to providing another submission to Mr Sedgwick to help complete his review. This is a complex area with mixed views so we encourage interested parties to have their say,” Ms Tate said.
In addition to reviewing payments for the selling of retail banking products like deposit accounts and mortgages, the Sedgwick Review will also comment on overarching principles on how banks pay and incentivise all executives and employees.
More information on the Sedgwick Review is available at retailbankingremreview.com.au.
As I recall the ABA were central to the establishment of the review in the first place, (mitigating the pressure for an independent financial services review) and perhaps they are surprised that the independent review is questioning commissions! We shall see.
