Dealer groups fight for talent

Focus on retention

By Julie May
Fri 02 Jul 2010

Lock-in arrangements could become more prevalent as dealer groups try to retain firms.

It is likely that more dealer groups will begin offering greater financial incentives to lock in member firms or take minority equity stakes in their practices in order to retain advisers, broker firm Kenyon Prendeville director Alan Kenyon has said.

The comments come on the back of an offer made by Genesys Wealth Advisers to its member firms this week, in which it would provide additional financial incentives that would only be maximised should member firms stay locked into the dealer group for a period of five years.

"Every dealer group wants to protect their distribution and within the framework of proposed legislation they will use every tool at their disposal, as they should," Kenyon told InvestorDaily.

"From a practice point of view, their issues will be around agreed performance and maintenance of service while the dealer group will be looking for commitment to growth.

"The interesting bit comes if one or the other party fall out of love and how they will then go about unwinding the arrangement.

"By locking yourself into long-term agreements you need to know how to get out and maintain your viability, and how to do it without throwing thousands of dollars at lawyers.

"I think there has been lots of discussion about these types of offers for a number of years, but the difficulty is formulating an arrangement that works and which can be effectively implemented."

Kenyon said time and time again institutions continued to demonstrate that they were not flexible enough to be partners with small businesses, so often there was a disconnect.

"A lot of work needs to be done to ensure any arrangement can meet both parties' expectations and it is a huge exercise in effective communication," he said.

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