This week the Financial Services Authority issued a “wake-up call” to the financial services market to re-think the way staff are rewarded. Consumer trust in financial services providers is in tatters. The market has been hit by a spate of mis-selling scandals including investment schemes and payment protection insurance. The FSA has becoming increasingly concerned that many of those who advise customers on the best product are on bonus-based incentive schemes that are “rotten to the core”. The result is that those selling or giving advice are perceived to be motivated mainly by the rewards on offer to them – and the consumer loses out.
Meanwhile, in another sector, the function of advice and financial management is arguably becoming more and more linked: a key reason for the recent health care reforms is to bring responsibility for healthcare expenditure closer to GPs – thereby ensuring that commissioning decisions provide value for money.
Conflicts of interest in the NHS are not new: the growth in the use of financial incentives in healthcare has been around for years. This week, even before the current reforms take full effect, the BMA claimed that the NHS is offering GP practices money in return for sending fewer patients to hospital – money that can be used either on improving services or on boosting GPs’ own salaries. The Department of Health responded by saying that it will stop such contracts.
But by bringing financial decisions and the provision of medical advice ever closer together, the current reforms are, if anything, likely to entrench these types of conflict of interest. And pressures to save money are hardly going to go away in the near future as the NHS battles to save up to £20billion by 2014-15.
In financial markets, mixing financial incentives and the provision of advice has undermined professional standards, resulting in scandal after scandal, and consumers ending up with products they don’t want or need. At the moment, trust in GPs is high. But healthcare markets should heed the warnings of the financial sector. Badly structured incentives can damage relationships with patients and weaken trust in the whole market. Let’s not forget that once upon a time, bankers were seen as sound and trustworthy too.
This post was first published on the SMF Market Square.