Thinc Group is introducing a radical remuneration structure which offers financial advisers "a dignified exit from the industry" at retirement but requires those not bringing in enough annual revenue to change their status within the firm.
Speaking at the Thinc Group annual convention in Birmingham earlier this week, group distribution director Gregg Taylor told delegates the firm needs to adopt a more profitable and professional remuneration strategy as well as develop retained profit for the future, following its acquisition last month by life insurer Axa,
More specifically, employees of the Thinc national and network will work under new business terms over the next three years which will require each adviser to generate at least £80,000 in gross revenue in order to be seen as contributing to the profits of the company.
Employees generating over £100,000 will receive extra long-term financial rewards for doing so but, in contrast, any employee who is found to be generating less than £50,000 – thought to represent 11% of the adviser base or around 300 advisers – will be moved to Thinc’s network and required to “cover their own costs” when new contracts are implemented at the beginning of 2007.
Those who do consistently meet their performance targets and bring in gross revenue of over £100,000 could then be eligible for an annual bonus of 10% as well as points towards the Axa long term incentive plan – scheduled to pay out up to £100m to advisers and managers at the end of 2009 if its targets already set by the life insurer are met – and will get better support services from the firm than those generating lower incomes.
But a key component of the new deal is the introduction of the Thinc Adviser Annuity Scheme, a new proposition for the intermediary market which allows advisers to gradually sign over their client base – or more importantly the accumulated wealth of funds under management – to a new adviser at Thinc over a 12-month period and receive an annuity for life dependent on the revenue earned before their departure and the potential retention of the client assets with the adviser group.
Taylor explained an annuity scheme was being implemented so advisers could effectively continue to retain earnings from trail commission – a prospect which advisers cannot consider directly as the FSA requires advisers to be authorised to receive information on client assets and associated commissions.
The scheme also reflects Thinc’s shift towards building higher retained income from clients with assets in life and pensions and those who pay for that advice either through trail commission or by fee, and the potential shift of business propositions towards client buying power prompted also by the use of more efficient technology-led services.
Taylor says an adviser doing £100,000 of business every year for 10 years, for example, assuming they earn a trail of 0.5% on client assets, could leave the firm and receive an annual annuity of £50,000 either for the rest of the life or for as long as the client stays with the client.
“This is a market leading proposition if I’ve seen one. Do you want to make more upfront commission or build a healthy retirement fund? I know my answer. We cannot continue as we are, as we are not generating the required level of profitability,” says Taylor.
Simon Chamberlain, group ceo at Thinc, believes the TAA scheme “allows advisers, now and in the future, a dignified exit from the industry” by giving them a retirement package linked to their previous work rather than what he describes as a “kick out” plan.
Its part of a wider strategy to expand the growth potential of the firm, which he also says will include fresh acquisitions within the next three years.
Thinc executives say they are currently in discussions with 20 firms about potential mergers in 2007.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Julie Henderson on 020 7968 4571 or email [email protected].IFAonline
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