Financial incentives set to drive change
Most financial planners will tell you that good practice management is good for them. Few, however, will be able to tell you exactly what good practice management is worth to them. Until now, that is.
Australia’s largest financial planning dealer group, AMP Financial Planning, is preparing to launch a new system of rewarding its financial advisers that will link remuneration directly to issues of practice management.
The new remuneration model, due to take effect from July 1, will mean AMP advisers will be rewarded in the first instance for the volume of sales they generate. That is, advisers who reach certain sales targets will not only generate more commissions, but also get a better cut of those commissions.
But AMP advisers will also be rewarded under the new model for adopting what AMP is calling its preferred dealer group business model.
The model includes advisers assuming closer marketing and branding ties with AMP, as well as achieving set levels of competence in terms of compliance, business management and education. This extends right down to the positioning of signage in an adviser’s office, the leasing arrangements and location of an adviser’s business premises and even the minimum qualifications of the people an adviser employs.
“For most advisers there is no direct link between financial rewards and employing Certified Financial Planners. But with AMP advisers it now has a direct link to remuneration,” AMP Financial Planning managing director Greg Kirk says.
The carrot for individual planners and planning groups to adopt the new model is twofold.
Firstly, a better rate for commissions from AMP depending on the degree with which an adviser complies with the preferred business model. And secondly, advisers complying with the AMP model will receive a better price for their business if they sell it to AMP through a buyer of last resort facility.
AMP developed the new remuneration structure over an extended period in consultation with advisers themselves, but has offered to reimburse all planners who are worse off in the first 12 months of the new model by up to $2,000 — essentially acknowledging that, in the short-term at least, there will be some losers under the new regime.
However, it could be another side effect of the new structure that has the most profound effect on AMP’s network of advisers.
Because of the investment required by planners to reorganise their business towards AMP’s new model, a high number of AMP affiliated planners have considered merging with other businesses since details of the plan were announced.
“Nearly every one of them is thinking whether they should aggregate [with another AMP adviser] down the road,” Kirk says.
While AMP has given itself three years to fully implement the new structure across its network of advisers, Kirk says the remuneration model will impact on AMP advisers almost immediately.
“Today, you are not going to find a lot of AMP offices that are going to have AMP signage up, but within 12 months that will be considerably different,” he says.
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