Firm retains advisers by offering a piece of the pie
An Australian financial planning firm has rolled out a share-ownership scheme for its top-of-the-line financial planners in Hong Kong. The team at Professional Investment Services (PIS) hope they have come up with an attractive way to keep their financial advisers on board - by issuing them stock in the privately held company.
Advisers are normally essentially freelancers who pay a franchise-like fee to the parent company, which in return provides them with training, administration and back-office support. They also earn conventional commissions for the products they sell to their clients.
Normal advisory firms might leave it at that. But Queensland-based PIS, which in May bought the Hong Kong-based advisory company Horwath Financial Services, also issues shares in PIS to the advisers when they hit certain benchmarks.
'The whole idea is that we take the business forward together,' said Robbie Bennetts, chief executive of the Professional Investment Services group. 'It's a great way to encourage people to work hard because they see the business being successful, and they know their shares are going to be worth more money. It's nice to know you are building something for yourself.'
Mr Bennetts said he was only aware of a couple of listed financial-services firms that issued stock, and then it typically just went to full-time employees and not contractors such as the advisers - who could leave and take advisory clients with them.
'For advisers, it's very rare that anybody offers equity in the business. Life insurance providers and banks offer good rates of insurance, good incentives, but at the end of the day, you work very hard to build the business for that insurance company or bank.'
The company has 878 shareholders in Australia, its largest scheme. It has also rolled out the programme in New Zealand, Singapore, Canada, Malaysia, Hong Kong and China. In both New Zealand and Singapore, shares that cost the equivalent of A$1 (HK$6.8) when the scheme started two years ago are now worth A$4 each. PIS has the first option to buy back any shares that its advisers sell. The price is set by the board at least once a year. The company is also considering an initial public offering in Australia.
Since PIS expanded into Hong Kong with the Horwath acquisition, it is only just rolling out the share-ownership scheme in the city. No advisers have yet qualified for the scheme.
But Mr Bennetts said the company set the bar deliberately low in Hong Kong, and it expected most of its advisers to qualify for the first tranche of shares within 12 months. They stand to gain added tranches of shares if they hit higher revenue targets, whatever the time frame.
'We set the amount for the first year fairly low, and we are doing that because we want to encourage people to try the model,' Mr Bennetts said.
