Challenger launches new distribution model

Following the signing of a distribution alliance agreement betweenChallenger Internationaland Credit Suisse First Boston (CSFB) late last year, Challenger has launched a new business and advisory remuneration model to go with it.

Challenger First Pacific is the new name for CSFB’s Australian Equities Private business, which Challenger acquired, in December last year.

The alliance is regarded as a win-win situation for both parties. Challenger will gain access to Challenger First Pacific’s client base as well as CSFB’s domestic and international research capabilities.

Meanwhile, Challenger will facilitate CSFB’s access to its advisory network of more than 10,000 financial planners across Australia.

“Challenger First Pacific represents a valuable distribution channel for Challenger’s expanding range of products, and has real synergies with the Group’s existing corporate finance, corporate superannuation and corporate lending businesses,” Challenging managing director Bill Ireland says.

A key element of the new business is its introduction of a new revenue-sharing model for the Australian private client advisory market giving advisors a greater percentage of the revenue they write. In return, advisors will pay Challenger a flat yearly ‘alliance fee’ and cover all transaction costs.

According to Ireland, the Challenger First Pacific business model will shift some of the risk back onto advisors in return for a higher share of the commissions.

“We see this as a step forward for the private client advisory market in Australia — one that will underpin a more sustainable, long-term business, and provide better balance for today’s investment environment,” Ireland says.

Former CSFB Australian equities private managing director Bryan Madden will remain as managing director of Challenger First Pacific, with plans to grow the private client business organically to approximately 200 advisors within two years.