Adviser incentives

[Archived User]

Can anyone share their thoughts/ideas on how to incentivise Advisers and comply with FOFA at the same time? I.e. no volume bonus for product sales.

[Archived User]

The new ban on conflicted remuneration will shake-up the traditional approach to providing incentives to advisers, but there remain several alternatives to reward performance.

It is helpful to remember that the ban is complementary to the ‘best interests’ duty – remuneration will only be banned if it presents a conflict between the interests of the adviser and the client.  For example, licensees, advisers and platform operators can still receive volume-based payments if they can prove that the benefit will not influence the financial service advice or product recommendation given to retail clients – consider the weighting, causation and proximity of the reward.

Licensees are looking at new ways to reward advisers.  Some examples of incentives that comply with the amendments are fee for service structures, benefits that have a genuine and relevant education and training purpose, IT software or support related to the provision of financial product advice, bonus arrangements calculated using a genuine ‘balance scorecard’ and rewarding advisers that demonstrate exemplary compliance behaviour.

Many employers have already begun to align their practice with the reforms and are creating new ways to provide incentives for and reward employees (despite the ban not being mandatory until 1 July 2013 or earlier if you opt in).  It is a good idea to make the most of the transition period and begin to trial different approaches to allow you time to find the best alternative for your workplace before 1 July 2013.

Please contact our team if you seek further information.

Author: Ian McDermott

Co-contributor: Sarah Holley

[Author]

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