ASIC made aware of sign-on bonuses

The financial services regulator has been notified by a number of dealer group heads about sign-on payments being offered to financial planning practices to join other licensees, but the regulator has signaled it is not actively looking into the issue. 

Money Management understands the Australian Securities and Investments Commission (ASIC) has been notified about the "sign-on" or "transition" payments employed mostly by institutionally-owned dealer groups, but hasn't seen enough evidence of the money actually being paid out to act on the issue. 

One dealer group head who recently notified ASIC about sign-on bonuses is WealthSure chief executive officer David Newman, who said some of his advisers had been approached by intermediaries representing certain bank-aligned dealer groups offering large amounts of money to move across. 

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"It has been interesting to observe some of the tactics of our competitors in terms of the mechanisms they use to recruit advisers," Newman said, adding there was a level of interest coming from the regulator when he raised the issue. 

"At the end of the day you don't mind going toe-to-toe and letting the best man win - that's something you live by and you learn by - but when the tactics change and there's other things happening it becomes a concern." 

Newman said offering transition payments to planning practices conflicted with the spirit of the Future of Financial Advice (FOFA) reforms, such as transparency and integrity. 

"It's a [funds under management] grab. They're looking to incentivise and subsidise and I don't think that's necessarily a level playing field." 

A financial planning practice that was looking to move to Paragem from a bank-owned dealer group earlier this year was offered a retention payment three times the volume bonus for the year to stay on for another five years. 

"I think it's a commercial decision for the parties to get involved in," said Paragem managing director Ian Knox. 

"What is disappointing is it lacks any moral leadership in the industry at a time the industry is looking for integrity," he added. 

"Just as planners are trying to become professionals, it seems to me receiving lump sum payments to effectively become an agent of someone denigrates the profession." 

While ASIC might take a closer look at adviser recruitment practices in the future, Knox said there was little the regulator could do, but that it might fall into Australian Competition and Consumer Commission's (ACCC's) territory. 

"I doubt they [ASIC] can do much about it other than [raise] the concern that the five major players are all active in doing that and as a consequence you would have to have concerns regarding anti-competitiveness, so the ACCC should be aware of it," Knox said 

"If the regulator was to get involved, I think in the interest of transparency it should be mandated or mandatory that if you receive a payment to be part of a licensing arrangement that you are obliged to disclose if the licence has product manufacturing attached to it." 

This type of recruitment practice received extensive media coverage during the AXA/AMP merger and after the Commonwealth Bank's acquisition of Count Financial.




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