It's the largest ever fine imposed by the FCA, or its predecessor the Financial Services Authority (FSA), for retail conduct failings.
The failings affected branches of Lloyds TSB, Bank of Scotland and Halifax (which is part of Bank of Scotland).  The firms agreed to settle at an early stage and therefore qualified for a 20 per cent discount. Without the discount the total fine would have been £35,048,556.
The incentive schemes led to a serious risk that sales staff were put under pressure to hit targets to get a bonus or avoid being demoted, rather than focus on what consumers may need or want, says the regulator. In one instance an adviser sold protection products to himself, his wife and a colleague to prevent himself from being demoted.
Tracey McDermott, the FCA's director of enforcement and financial crime, said: "The findings do not make pleasant reading. Financial incentive schemes are an important indicator of what management values and a key influence on the culture of the organisation, so they must be designed with the customer at the heart. The review of incentive schemes that we published last year makes it quite clear that this is something to which we expect all firms to adhere.
"Customers have a right to expect better from our leading financial institutions and we expect firms to put customers first – but firms will never be able to do this if they incentivise their staff to do the opposite. Because there have been numerous warnings to the industry about the importance of managing incentives schemes, and because Lloyds TSB had been fined in 2003 for unsuitable sales of bonds, we have increased the fine by ten per cent.
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The FCA found that both firms had higher risk features in their advisers' financial incentive schemes which were not properly controlled. This created a significant risk that advisers would maintain or increase their salaries, and earn bonuses, by selling products to customers that they did not need or want.
The FCA increased the fine by 10 per cent because:
· The previous regulator, the FSA, had warned about the use of poorly managed incentive schemes over a number of years; and
· The firms' previous disciplinary record, including an FSA fine on Lloyds TSB Bank plc for the unsuitable sale of bonds in 2003 caused in part by the general pressure to meet sales targets.
Both firms have agreed to carry out a review of higher risk advisers' sales and pay redress where unsuitable sales took place. It is not yet possible to say how much redress will be paid until the firms have identified how many customers are affected. Customers do not need to take any action at this stage to be included in the review and they will be contacted by the firm in due course.
The FCA's investigation focused on advised sales of investment products (such as share ISAs) and protection products (such as critical illness or income protection) between 1 January 2010 and 31 March 2012.
During this period:
· Lloyds TSB advisers sold more than 630,000 products to over 399,000 customers, who invested about £1.2bn and paid £71m in protection premiums.
· Halifax advisers sold over 380,000 products to more than 239,000 customers, who invested around £888m and paid £38m in protection premiums.
· Bank of Scotland advisers sold over 84,000 products to over 54,000 customers, who invested around £170m and paid £9m in protection premiums.

The FCA is currently conducting follow up work to see if firms are now managing the risks to consumers from sales based incentives and plans to publish the findings in the first quarter of 2014.