Published June 16, 2009

Banks tweaking pay to rein in pushy sales staff

This will affect the way products are sold to customers

By CONRAD TAN

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(SINGAPORE) Banks here are changing the way they train and pay their front- line sales staff and relationship managers (RMs), in response to recent complaints about mis-selling in the industry and new guidelines on how financial institutions should treat customers.

Mr Raju: We've always paid based on a balanced scorecard approach

In public, most banks say their current pay formulas are based on multiple measures rather than just rigid sales targets - to ensure that staff aren't tempted to push products or services aggressively. Banks also insist that the training received by sales staff - and RMs, who provide more personalised service to wealthy clients - doesn't just focus on knowledge of products or services but also includes 'soft skills' such as how best to assess a customer's needs.

In private, however, several banks here say they plan to tweak - or even overhaul - existing pay structures and training processes. Most of these reviews are in progress, and few banks responded in detail to questions from BT.

But the changes - some of which have already been rolled out - are likely to affect how the banks sell all kinds of products, ranging from unit trusts and credit cards to home loans and insurance. They will also affect the so-called 'mass affluent' segment - wealthy people who qualify for more personalised service but aren't yet private banking customers.

Rajan Raju, head of consumer banking at DBS Group, says the bank has been moving to refine its sales process since last year and changes were introduced in January this year.

'We now ask more questions to find out about customers' investment experience and objectives and risk profile,' he says. 'We preface all in-house investment products with a summary sheet. And customers must affirm that they have read and understood the product before investing.

'Where appropriate, we ensure there is a cooling-off period for customers so they can withdraw if they change their mind within a stipulated period.'

In some cases, bank staff also call customers to reconfirm that they understand a product and its risks, Mr Raju adds.

'Our compensation model has always been based on a balanced scorecard approach,' he says. 'This takes into account the quality of the fact-finding process, the financial needs analysis, the suitability of the product and customer satisfaction.'

At OCBC Bank, 'we are in the midst of implementing a revised remuneration framework for sales staff', says head of branch banking Phang Lah Hwa. Key changes will include new measures of performance to track sales and service quality, revising pay packages of sales staff to include fixed and variable components, and paying variable remuneration on a deferred basis, she adds.

At United Overseas Bank (UOB) - the only bank to give an estimate of the proportion of fixed and variable pay its sales staff receive - the remuneration of front-line bankers is pegged to a scorecard, periodically reviewed, that includes sales targets but also takes other performance indicators into consideration, says head of sales and distribution Kevin Lam.

Depending on how well staff perform, based on these indicators, the proportion of fixed and variable income changes, he adds. The current average mix is 'about 65 per cent fixed and 35 per cent variable'.

At Maybank Singapore, training of sales staff 'has always embraced a knowledge- and risk-based approach', says head of consumer banking Helen Neo. 'For the past few months, the training programme has focused on revisiting the fundamentals of financial planning and the reinforcement of risk concepts,' she says. 'We have also put in place a more robust post-training assessment process to ensure our sales staff understand what they have been taught.'

In paying sales staff, Maybank takes into account sales of multiple products, quality of sales, competency, delivery attitude and customer feedback, Ms Neo says.

Dennis Tan, director of sales and distribution at Citibank Singapore, says the bank's compensation structure has evolved over the years 'to place increasing emphasis on client satisfaction and relationships'.

'Sales targets, where they apply, are overall revenue goals', which means there is no incentive to push a particular product, he explains.

Citi's personal bankers, RMs and wealth management specialists are paid a fixed salary dependent on their seniority, plus variable component that is performance-based, Mr Tan says. 'A significant portion of the variable component is not related to the generation of revenue, but is pegged to other factors that include adherence to compliance policies, customer feedback and client satisfaction.'

On April 3, the Monetary Authority of Singapore (MAS) issued 'guidelines on fair dealing' to financial institutions.

The 35-page document, which supplements the Financial Advisers Act, describes five outcomes that will be used to judge whether banks and other financial institutions here treat customers fairly.

'We believe the new fair dealing guidelines will help boost public confidence in investment products and revitalise the overall investment climate,' says Ajay Kanwal, regional head of consumer banking for South-east Asia at Standard Chartered Bank. 'They promote greater clarity and transparency in both the buying and selling of investment products.'

The pay of Stanchart RMs is based on indicators such as sales performance - 'with a non-product focus' - customers' assets under management, service quality and customer satisfaction, Mr Kanwal says. 'Another key measure is the number of customer complaints that a front-line staff member receives.'

Monica Wong, chief executive of HSBC's private banking business in Asia, says its RMs' pay packages 'are not commission-based as we do not compromise long-term relationships for short-term gains'.