The commercial objectives of business and practice development managers (BDMs and PDMs) are misaligned with those of the financial planners they service, according to a new report from Business Health.
Only one-third (38 per cent) of the 74 respondents to the Business Ready II study identified adviser profitability among their top key performance indicators.
“The question we asked was ‘Which of the following are formal determinants of success for your role?’ and over half … stated that in-house products was a formal determinant of success,” says Rod Bertino, partner, Business Health.
“We do have product BDMs in [this study], so that’s not surprising. But … I’m sure we will find dealer-group BDMs being rewarded and recognised on that as well,” he says.
The research, which gives an insight into the role of Australia’s BDMs and PDMs, was conducted during September and October 2015. Of these, 30 per cent were product managers, 50 per cent represented bank-aligned licensees, and 15 per cent were in the non-aligned and independent space.
The top three success factors were adviser retention (72 per cent), adviser satisfaction (58 per cent) and support of in-house products and platforms (54 per cent). Adviser profitability ranked sixth out of the seven options, just above “other”.
“But at some stage too, you need to reward the behaviour that you want, and if you want these guys out there building better, stronger businesses, such that we all win, then perhaps that profitability factor needs to be figured into the remuneration programs,” Bertino says.
Somewhat surprisingly, the study shows these KPIs have not shifted perceptibly between the pre- and post-Future of Financial Advice (FoFA) regulatory environments.
“In 2013, 58 per cent stated that in-house products was a formal determinant of success, and it’s now 54 per cent – so no real change.”
Likewise, he says that in the same study conducted in 2013, 37 per cent were rewarded for adviser profitability, a figure just 1 per cent lower than the current finding.
Bertino concedes these could be lagging indicators, given it is now around one year since most financial services businesses shifted their systems and processes to the new FoFA environment. “But if they are lagging, the question is how long have we got to lag, in the eyes of consumers, the regulator and advisers?”
Managers are unhappy
He highlights declining levels of job satisfaction among BDMs and PDMs as the biggest change identified in the 2013 and 2015 iterations of the study. Only 20 per cent of managers indicated they expect to be performing the same role in the same organisation in three years’ time.
“They’re less satisfied with their role. Their workloads have increased, they’re servicing more advisers generally, they’re expected to do more with less, and they don’t believe that they’re getting support from senior-level management,” Bertino says.
Spending an increasing proportion of their time on administration was the biggest challenge managers identified. More than 40 per cent stated the impact of regulatory change – including FoFA, the Life Insurance Framework and the Tax Agent Services Act – was the top issue affecting them over the next 12 months.
The report queries whether there is “a need for these roles to be more clearly defined – what amount of administration should a manager do? Is it really the best use of the manager’s time?”
Almost half of the respondents indicated they were personally involved in monitoring adviser compliance, and more than one-third give advice or review Statements of Advice and client strategies.
