Financial planning dealer groups and practice principals are rethinking staff incentivisation packages in light of the Future of Financial Advice (FOFA) reforms, although many are waiting on further clarity from Treasury, according to Elixir Consulting managing director Sue Viskovic (pictured).
While pricing advice and learning to articulate their value proposition continued to be priorities for financial advisers, more practices were looking at the overall impact of the reforms on their business models, said Viskovic, which included staff remuneration and incentivisation.
“In the FOFA paper, it explicitly said you can’t remunerate staff or pay bonuses based on the sale of products,” she said. “That creates some interesting challenges for advisers, who don’t want to just pay high base salaries and not get performance from their staff.”
Elixir has developed a series of job descriptions and key performance indicators (KPIs) around qualitative factors to address this issue, and Viskovic said she had received a positive response from Treasury.
“You want to incentivise your staff and you want to reward the right behaviours in a practice,” Viskovic said. “Part of those behaviours include looking after your clients, not losing them, and winning new clients – these are other aspects that advisers can build into their KPIs.”
Viskovic said that other kinds of behaviours that would be measured to reward good advisers included good compliance scores in terms of auditing and management of client files; good retention of existing clients that demonstrated that the adviser was delivering quality service; and, should the business be in the process of transitioning to fee-for-service, looking at how many clients were signing on to their new ongoing service agreements and fee structure. She explained that the reward for such positive behaviours could be monetary bonuses or profit share.
“Paying an adviser a flat salary is taking away from the commercial reality of trying to reward good behaviour and practice,” Viskovic said, adding that Treasury had stated this was not its intention.
She said Elixir had explained to Treasury its viewpoint that successful businesses needed to be able to attract the right staff and reward them, and therefore expected to see more clarity from Treasury around what kind of incentives were permissible.
