While FOFA legislation has removed a number of commissions from adviser remuneration packages, practices should still look to recognise performance and client retention, according to Elixir Consulting.
Speaking to ifa about research undertaken by the firm, Elixir Consulting founder Sue Viskovic said it was still important for adviser remuneration packages to recognise performance despite FOFA legislation making this slightly more difficult.
“When FOFA came out it removed, rightly so, the inclusion of commissions in adviser salaries, but some people were then concerned they couldn’t have any performance aspects of remuneration package,” Ms Viskovic said.
“In order to be able to encourage and reward advisers for going above and beyond for their clients and delivering really great outcomes which then also helps business to achieve their growth target, then it’s important to be able to have some kind of skin in their salary package.”
Ms Viskovic said effective remuneration packages looked at as part of the study included financial incentives for performance and client retention, but noted these were “much more in-depth” than pre-FOFA packages.
“You can’t just have a target based on a physical dollar number of sales, it has to be reflective of the delivery of quality advice, so it was quite interesting to see the different businesses and the different types of structures they’d put together to reflect that,” Ms Viskovic said.
“You can’t just say ‘well if you hit a sales target of this much, you’re going to get a bonus of this much’; you have to have a really strong qualitative overlay, and what ASIC’s looking for is rewarding or encouraging quality advice.”
Ms Viskovic added that where a revenue component was included, more effective remuneration packages would have this focused on client retention.
“Where we saw the models that were working really well, they did have higher advocacy scores from their client base, they did have good strong growth rates and good profit margins, and that was a direct result of them giving quality advice and servicing clients really well,” she said.
“The comforting thing out of that is that it is evident that a business that can be fast growing and bringing in lots of new clients, if they’re doing it in the right way, it’s a win-win for business owner as well as the client, because the reason they’re bringing in new clients is not just because they have hard sales people, but because they have a great system, they have a great process, and they deliver fantastic advice, so clients just keep referring more and more business to them.”
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