Challenger Financial Services Group’s lucrative profit sharing arrangements for its financial advisory channel has boosted its funds under advice and administration by double digits.
Funds under administration jumped 10 per cent to $2.3 billion to December 2007, compared to the previous corresponding period.
Also, funds under advice increased 21 per cent $6.8 billion.
On July 1, a profit-sharing scheme kicked in where Genesys Wealth Advisers member firms receive 20 to 40 per cent of the revenue from 20 rebate-paying platforms, proportionate to the business they write.
This has generated higher inflows from Genesys planners into Challenger-owned and proprietry platforms.
“Net income grew 8 per cent on the prior period and expenses held flat, demonstrating that post the implementation of the new model, the business is on the path to some scalability,” Challenger chief financial officer Paul Rogan said.
Revenue productivity per adviser has increased to more than $82,000 per adviser, Rogan added.
Several “low income-generating” financial advisers left after the new model was implemented.
Challenger reported a 5 per cent decline in net profit after tax of $96 million for the six months to December 2007, compared to the prior corresponding period.
This was due to the cost of interest following the acquisition of Choice Aggregation Services.
At December 31, 2007 Challenger had $19 billion in funds under management, an increase of 23 per cent compared to the prior period.
“We think the result is a resilient performance in what have been extremely challenging market conditions,” Challenger chief executive Michael Tilley said.
Tilley said Challenger would make the most of global opportunities presented by the adverse credit market.
“While we’re only doing it in small volumes, we are seeing forced sellers disgorge assets to us that fall into the AAA rated almost risk-free, that are trading anywhere between 200 and 400 basis points over. We are quietly mopping up those as we go along,” he said.
