The Culture Test

All Sectors

• The Problem

  The FCA expects tangible changes to culture across retail financial services — not values posters, but observable differences in how decisions are made when customer interest conflicts with commercial interest. Most firms have no systematic way to assess whether their culture actually supports good customer outcomes. That gap matters in every sector: in banking, where branch and product incentives can quietly reassert themselves; in wealth, where adviser economics shape what gets recommended and what gets reviewed; in insurance, where loss-ratio pressure presses against borderline claims. Without a behavioural test of culture, firms cannot evidence the change the FCA expects, and they cannot detect cultural drift when it occurs.

• The Pattern

  The structural move is to make culture observable by examining the decisions where it is tested — not the statements where it is declared:

  Decision archaeology

  Sample real decisions where customer and commercial interests were in tension. A pricing decision, a lending or claims decline, a complaint resolution, an ongoing-advice review that did or did not happen, a distribution partner review. Examine what happened, what was considered, who was involved, and what prevailed. If decisions consistently favour the customer when it costs the firm something, that is evidence. If they consistently favour the commercial outcome and rationalise it afterward, that is also evidence. The pattern is in the decisions, not in the policy

  Incentive mapping

  Map every incentive structure — sales targets, bonus criteria, performance metrics, promotion criteria — and test whether they reward behaviour that produces good customer outcomes or behaviour that produces commercial outcomes regardless of customer impact. If a branch manager's scorecard is dominated by sales volume, if an adviser's variable pay is driven by AUM gathered, or if a claims handler's performance is measured on throughput, the incentive structure is misaligned with the Duty regardless of what the values statement says. The FCA wrote to remuneration committees specifically on this point

  Escalation as signal

  Track whether people raise concerns about customer outcomes, how those concerns are handled, and what happens to the people who raise them. A firm where nobody escalates customer concerns either has no problems or has a culture where raising them is not safe. Escalation volume, resolution quality, and career consequences for escalators are observable cultural indicators that do not rely on self-report

• Indicators It's Working
  • Decision samples show a consistent pattern of customer interest prevailing when in tension with commercial interest

  • Incentive structures have been reviewed and adjusted where they conflicted with good customer outcomes

  • Internal escalation of customer-outcome concerns is tracked, with volume, resolution, and outcome data reported to the board

  • The annual Consumer Duty board report includes a culture assessment based on behavioural evidence, not policy compliance or survey scores

• In Practice

  • A retail bank's annual culture survey reported that 91% of branch staff agreed the bank "puts customers first." A decision archaeology exercise then examined branch performance scorecards and a sample of cross-sell conversations from the same year. Eighty per cent of branch manager scoring weight sat on sales volume and product penetration; outcome metrics accounted for 5%. Conversation reviews showed that where a customer expressed uncertainty about a product, the documented response was usually a reframed sales pitch rather than a pause to test suitability. The same two branch managers appeared repeatedly in the small minority of cases where a sale had been actively stepped back from on suitability grounds. The culture was not in the survey score; it was in the scorecard and in those two managers swimming against the incentive current. The FCA's findings on retail banking incentives describe exactly this gap between stated culture and incentive design.

  • A wealth manager charging ongoing advice fees commissioned a culture review after the FCA's ongoing advice review highlighted firms charging for reviews they could not evidence delivering. Decision archaeology on a sample of client files found that where annual reviews had not been completed, file notes consistently rationalised the gap as client-driven ("client did not respond to outreach") rather than recording any internal challenge. Incentive mapping showed adviser variable pay was 100% linked to AUM and net new money; nothing was linked to review delivery or post-review client outcomes. The firm restructured variable pay so that 25% reflected delivery of contracted services and post-review client understanding, and introduced a quarterly committee review of un-delivered reviews with a presumption of fee refund where delivery could not be evidenced. Within two reporting cycles, review delivery rates rose materially and pipeline conversations began including "can we deliver what we are about to charge for?" alongside "can we win the assets?" The values statement had not changed. The incentive structure and the governance challenge had.

• Watch-Outs
  Common failure modes

  The failure mode is treating culture as a communications exercise — running a campaign about customer-centricity without changing the structures that drive behaviour. A second is measuring culture through surveys that ask people whether they think the firm is customer-centric: self-reported sentiment is not behavioural evidence. A third is applying the culture test only to customer-facing functions and ignoring the decisions in pricing, product design, lending policy, advice oversight, and distribution management — where the most consequential customer-outcome trade-offs actually occur. A fourth is treating the culture test as an annual ritual: cultural drift happens between reviews, and the test needs a continuous sensing component, not just a once-a-year exercise.