Managing the money

It appears although remuneration management has always been a feature of back-office systems, financial planning groups have not widely utilised this function.

With the increasing popularity of the fee-for-advice model, dealer groups are moving towards more complex systems of remuneration and this has posed a new logistic challenge to system providers, and to the groups themselves.

The gaps in the current offering of remuneration management systems mean dealer groups may be using more than one system, or handling the back end in-house.

Some dealer groups are opting to subscribe to independent system providers who cater exclusively in the business of planner pay management.

Does this mean back-office platform providers are missing out on an important component of the financial planning practice relationship? Not necessarily, according to Aviva’s general manager group marketing and distribution development Paul Northey.

“In building practice management solutions, platform providers like Navigator have not identified the issue of remuneration management as being at the forefront,” he says.

However, Northey says the Navigator back-office system does accommodate a variety of planner needs.

“This ranges from different commission bands to fee-for-advice models and dial-up structures,” he says.

Northey says Aviva’s platform, Navigator, is used by a diverse range of financial planners and for this reason is compatible with a variety of remuneration structures, including independent systems like Dealer Management Services (DMS).

Northey says the Navigator product alone does not operate as a complete commission management system, but points to the long standing alliances with DMS as one efficient way of handling the complex system of planner payroll systems.

IWL’s executive general manager financial advisory solutions Ross Johnston disagrees that dealer groups should have a need to use more than one back-office system and says IWL has flagged remuneration management as an area for future development.

Johnston admits that IWL’s VisiPlan product is not designed to cater for every scenario, but views this as a challenge in light of the increasingly complex pay structures being implemented by dealer groups.

“It depends on the size of the dealer group. Our back-office commission management tools tend not to be used as a total solution amongst the larger groups, but are more likely utilised by smaller firms with less complicated commission structures,” Johnston says.

Johnston says IWL is looking at the commission processing area, and identifies that the development of straight through processing (STP) technology will be a key driver in developing a streamlined management remuneration system.

“The fee-for-advice model just adds another layer of complexity,” he says.

Johnston says flexibility is important, and this is an opinion he shares with Grosvenor Securities’ marketing director Dennis Munari.

Melbourne-based Grosvenor Securities has a staff of 58 and fills up to 80 per cent of its planners’ pockets through the fee-for-advice remuneration structure.

According to Grosvenor’s marketing director Dennis Munari, the need for effective software to manage the planners’ pay is critical.

“We use a separate back-office platform for most parts of the business, but use an independent system, DMS, for remuneration management,” he says.

Munari adds Grosvenor has been using the DMS system for four years and finds it manages the group’s complex remuneration structures effectively, but this isn’t the only reason Grosvenor has gone with a separate system provider.

Munari says being reliant on only one back-office provider means that any changes made by the provider can have an impact on the group’s business, and an independent provider like DMS is at this point, the best fit for his mid-sized dealer group.

Grosvenor Securities is one of the 56 dealer groups in this years Money Management Top 100 Dealer Groups Survey that revealed how its planners were paid. Interestingly, over a third of this group subscribed to the fee-for-advice model in some form and many were using different back-office systems to administer planner payments.

If the fee-for-advice model continues to enjoy a surge in popularity, remuneration management systems may emerge as a point of difference between back-office providers, although the existence of niche operators means that planners have choice and at least for the time being, hold the balance of power.