Its fair to say that our experience is that adviser remuneration packages that we see are generally not particularly efficient. Equally generally, we don’t do anything about it because the schemes are not increasing the regulatory risk within a firm.
However the fact remains that in our experiences advisers are not efficiently incentivised. With the exception of one firm, who, to us, have cracked it.
The normal adviser remuneration package we see is firms giving advisers employed contracts with good benefits and then expect them to produce efficiently and toe the procedures line. At the end of each year, the firm hands out a discretionary bonus out of profits. Our observations are that the output from this model is poor new business acquisition, average levels of client servicing and haphazard adherence to in-house regulatory procedures.
The following example is the glowing exception to the rule and the proof of the pudding is in the firm’s data, which shows excellent new business levels, client servicing and procedure following. Here it is. This is for a self employed adviser but the principle works for the employed too.
- Advisers are paid a base percentage for production and trail (or a low base wage for employed advisers);
- Base is enhanced by various percentage points for
- Additional qualifications
- Revenue levels
- Top line percentage is reduced when
- File reviews get graded C or D on a A-D scale
- Complaints are upheld
- Internal or external (FCA notifiable) breaches occur at an absolute level – so any breaches impact earnings
- Ongoing trail is switched off if client serving level counts fall below a threshold
- Another neat control is that huge cases get settled to the adviser on the drip
There is a rehabilitation timeframe during which the adviser must show appropriate “penitence” by adhering to the benchmarks before the income thresholds are re-assessed.
We love the concept.
Food for thought?