By Barbara Messer
Two yearsago, the National Australia Bank (NAB) purchased MLC from Lend Lease in a deal worth $4.56 billion. At the time, NAB offered MLC employees a retention package to keep them on board, with the last portion of the retention payment only just paid out in July 2002.
A spokesperson for MLC says: “turnover rates have been very normal, it’s not like we saw a huge walkout in July. It’s now a couple of years on from the purchase, and most people have seen through the integration process and realised there are more career opportunities within the larger group.”
‘Golden handcuff’ incentive payments to financial planners within MLC’s distribution arm expired in July 2001.
Today, planners are encouraged to stay involved with NAB/MLC through a buyer of last resort facility, where MLC will buy their business at a guaranteed price.
This month, a buyer of last resort facility becomes available to financial planners at Bridges, two years after its acquisition by the Tower Group. New planners joining Bridges must wait two years before the same facility becomes available to them.
But the bulk of Tower’s golden handcuff package finished one year ago, and may have included loans paid to Bridges employees that were ‘forgiven’ without repayment, according to some industry sources.
In light of the continued trend towards consolidation in this industry, these kinds of payouts are a reminder to companies making acquisitions that the business they buy will not necessarily include the staff that make up the business.
This challenge was illustrated earlier this year, when 11 financial planners at Godfrey Pembroke left to set up their own dealership called Vector Financial Consultants, signalling their disillusionment with Godfrey Pembroke following its integration with NAB/MLC.
As a result, Vector managing director Rob Taggart is conscious of the sometimes indelible relationship that planners hold with their clients, and has pledged to actually help planners that leave Vector to take their clients with them if the clients choose to go.
“This is a relationship-driven business, but it isn’t good to force relationships with clients,” he says.
“Institutions that buy successful dealerships buy the business, but not the planners or the relationships they have with their clients.”
Taggart says incentive schemes, such as paying bonuses to planners that use certain products or guaranteeing a buyer of last resort facility, are common tricks to entice staff to stay on board, but may not be enough to convince financial planners to stay on and adapt to institutional life.
Walker Hamill recruitment consultant Ross Falconer says the most common grievance from financial planners results when dealer groups buy out smaller practices that cannot cope with the increasing costs of today’s regulatory environment.
With these types of acquisitions, financial planners often suffer salary cuts if dealer groups take away their base salary and pay them commission-only remuneration.
Even if they are offered incentive payments to stay on board, the payments typically do not cover their long-term loss in salary, Falconer says.
