As the end of the financial year approaches, using a ‘balanced scorecard’ for paying adviser bonuses can avoid any conflicted remuneration and will have the potential to improve the return on your people investment.
It goes without saying that advisers are starting to turn their thoughts to what their bonus might look like as we head into a new financial year. While you may think you have this under control, are you confident your model complies with the conflicted remuneration requirements?
According to figures released by ASIC, a third of licensees are utilising a ‘balanced scorecard’ to pay bonuses to advisers. This approach ensures bonuses are determined using a range of measure that are not solely linked to the recommendation or sale of financial products. While the use of a balanced scorecard has certainly risen in recent years, the figure begs the question, “What are the other licensees doing to manage the issue?”
It is fair to assume that, in some cases, bonuses just aren’t paid to advisers or other tools are being utilised. For those who simply aren’t using a balanced scorecard because they don’t know what to do now that the game has changed, here is a brief summary.
Put simply, a balanced scorecard identifies a range of financial and non-financial indicators that need to be achieved to be considered eligible for a bonus. These are categorised into four groups of equal or similar weighting – employees, clients, processes and financial. Thus, the model implies that strong performance involves more than just financial results.
An added advantage of using a balanced scorecard is that it provides a framework for communicating how the organisation’s strategic vision aligns to the day-to-day work performed by advisers and employees generally.
An individual’s ability to understand how their role impacts the overall achievement of the business vision is critical to employee engagement. Survey findings by Deloitte suggest 73 per cent of employees who say they work at a ‘purpose-driven’ company are engaged, compared to just 23 per cent of those who don't. Further, six in ten Millennials cite a ‘sense of purpose’ as a key reason why they chose to work for their current employer. This suggests that awareness of and exposure to ‘purpose’ heightens an employee’s interest and commitment to their work.
A balanced scorecard also provides an opportunity to signal to advisers how they should go about achieving the desired business results, and what behaviours the business will reward and encourage. Is it acceptable to do whatever it takes to get a sale across the line and make sure you meet budget? Or do your advisers need to display leadership, teamwork and strong emotional intelligence?
The ability to define and articulate your company values and culture cannot be underestimated. Not only does it reduce the likelihood of unethical behaviour, it also increases the attractiveness of your brand. A recent Collegefeed survey reveals that for 75 per cent of Millennials, ‘culture’ is a determining factor when choosing a prospective employer.
There is no doubt a balanced scorecard presents a sound option for determining adviser bonuses. Done well, it also offers other benefits. A balanced scorecard will create transparency, consistency, articulate the purpose and impact of individual employees and reinforce an organisation’s culture. In turn, this fosters greater employee engagement and performance.
For anyone who doesn’t have a solution for addressing conflicted remuneration, I encourage you to take a closer look at the tool. Aside from helping to avoid the hefty penalties associated with breaching the conflicted remuneration requirements (up to $200,000 for individuals per breach and/or up to $1 million for a company per breach), it has the potential to improve the return on your people investment.
Christine Bau is principal of People Focused Consulting
SUBSCRIBE TO THE IFA DAILY BULLETIN
- 14 Dec 2018ASIC clarifies RG 146 requirements for advisersBy Adrian Flores
- 14 Dec 2018Sargon Capital acquires listed robo adviserBy James Mitchell
- 14 Dec 2018Industry body flags CPD burden under FASEA proposalBy Adrian Flores
- 14 Dec 2018Adviser exodus creating ‘enormous opportunity’ for accountantsBy Jotham Lian
- 14 Dec 2018Advisers embracing ESG investing, says surveyBy Adrian Flores
- 13 Dec 2018AFA picks apart CPD policy from FASEABy Adrian Flores
- view all