British regulators say that since they were warned about retail incentive structures that encourage poor selling practices most large financial firms have taken steps to improve their incentive structures, but it says that more work is needed.

The UK’s Financial Conduct Authority (FCA) released a report Tuesday, which notes that all the major retail banks have either replaced, or made substantial changes to, financial incentive schemes, which played a major role in the mis-selling scandals of recent years. However, the report also indicates that there is still room for improvement.

In particular, the FCA says that its review found that about 10% of firms are still using higher-risk incentive schemes, and appear not to be managing the risk properly. It also details a number of areas throughout the industry where it says that firms should concentrate on better managing their incentive schemes.

For example, it says that firms should be checking for spikes, or trends in the sales patterns of individuals, to identify areas of increased risk. It also recommends that they do more to monitor poor behaviour in face-to-face sales conversations; and, that sales that are officially made without advice should be monitored to ensure staff who are incentivised to sell do not give recommendations.

Additionally, the FCA says that firms must recognize that remuneration schemes that are effectively 100% based on sales increase the risk of mis-selling, and that this risk must be managed.

“Eighteen months ago we gave the industry a wake-up call and it recognised that a poor incentive culture had helped push bad sales practice, which led to mis-selling,” noted Martin Wheatley, chief executive of the FCA.

“We’ve seen some good progress but it is going to take time to see whether the changes firms have made to incentive schemes and their controls stick, and whether good beginnings are part of genuine cultural change,” he added. “But consumers can be assured that this remains an area that we will be watching closely to ensure poor practice doesn’t return.”

The FCA finalized its guidance on financial incentives in January 2013 and has since been working with the industry, with most large and medium sized firms committing to further improvements following the latest review, it reports.

The regulator notes that it has committed to further work on incentives for retail sales staff, and that in addition to its routine supervisory work focusing on this area, it will also examine firms’ performance management approaches. “The progress that has been made, and the further changes required to build on it, will only be effective in reducing the risk of mis-selling if they are embedded for the long term, and part of wider cultural change that places consumers at the heart of firms’ businesses,” the FCA says.