Independent dealer group Risk and Investment Advisors Australia (RIAA) has launched an equity scheme to its advisers that will allow them to share ownership of particular product margins.
The dealer group recently established a separate company, RIAA Pty Ltd, which is the vehicle that owns margin in certain financial products that the licensee's advice network uses.
"We're sharing the ownership of that product margin with our advisers so that gives them some certainty of revenue into the future because with us they actually own that revenue stream that comes off the back of products," RIAA chief executive Les Mace told InvestorDaily.
The dealer group, which is offering advisers a 49 per cent stake in the company, is currently in the process of building some private label products of which they will have ownership of the revenue stream.
"That creates the asset for us and for our advisers. If you look at the large institutional groups, they obviously own the products that their advisers are advising on and for businesses like us to survive into the future and to make sure our business is strong and well funded we need to be playing that space as well, so this is our response to that," Mace said.
He said the equity scheme had been well received by RIAA's network of 55 advisers.
"I would expect we're going to have 100 per cent take-up over time. We've started out with some platform products in there and then next year we're investigating doing the same sort of thing with risk products," he said.
He said the equity scheme was also a good recruitment tool for the dealer group.
"We can go out to the marketplace saying that not only do we share the margins that come off products, but we also allow our advisers to have an ownership position in that margin so in the long-term they get an asset value," he said.
"We understand too, of course, that the legislation is changing and volume-related payments won't be allowed, but these are private label products, they're not rebates or kick-backs from products, we actually have an ownership position in the margin in the product."
