Dealer group incentives

Just as planners will have to work harder to keep clients in the new market environment, so too will dealer groups to hang onto their planners.

While it’s commonplace for dealers to use cash incentives to lure planners to their network, the new market environment has seen cost-cutting across the industry.

Dealer group budgets will undoubtedly come under increasing pressure, and it remains to be seen whether such lavish spending is sustainable.

Brisbane-based dealer group Futuro Financial Services is taking a different tack.

In its bid to grow the network and reward the practices already on board, Futuro plans to introduce an equity program for practices in January 2009.

The move will see 40 per cent of the Futuro network owning the dealer group, with the remainder of the equity staying with the current owners.

Managing director Dennis Bashford, who announced the initiative at the Futuro Business Directions Forum in Melbourne today, says there are three main reasons why a dealer group offers equity to its planners.

The first is simply retention – getting the planners personally and financially committed to the dealer group increases the level of commitment and loyalty of the practices, and provides an incentive for them to stay with the group.

The second is commercial; whether the ultimate goal is to list, undergo a trade sale or implement some other succession plan that involves selling the business, having a remuneration structure that aligns the planners with the dealer creates a stable network which makes the business more attractive and valuable to a potential buyer.

The third reason, he says, is about repaying the practices for the role they have played in getting the organisation to where it is today – in his words “sharing the spoils with those who have helped create them”.

Bashford says the decision to offer equity is “fulfilling an obligation that we had made to our network some time ago”.

“Futuro was a business that was always going to be sold – listing is an option – but it will probably be a trade sale, and that, we believe, will take place within the next three years,” he says.

The practices will earn equity dependant upon the revenue they generate to the licensee, and it will be up to the individual practice owners to decide how that equity is distributed.

In terms of revenue generation, Bashford says there is a base entry level for those entering the program, and practices that have been with Futuro for a longer period will be rewarded with increased levels of equity. The equity will be made available in a series of tranches over a three year period.

Since April last year, Futuro has grown its funds under advice to around $1.5 billion and plans to grow its planner contingent to around 80 by the end of this year and 90 this fiscal year.

*Professional Planner was the official publication for the Futuro Business Directions Forum held in Melbourne on Sunday 2 November and Monday 3 November, 2008.