Financial Planners Get Bonus Pay-offs

Sydney Morning Herald

Wednesday November 1, 2006

Stuart Washington

FINANCIAL planner Count Financial directly rewards its financial planning franchisees for recommending investment plans that make more money for Count.

This is in direct contradiction to the position of managing director Barry Lambert, who told The Sydney Morning Herald last week that financial planners were not individually rewarded for recommending particular investment options.

As revealed in the Herald on Saturday, financial planning groups are increasingly relying on rebates from large fund managers to support their businesses.

This rebate paid to financial planning groups is additional to up-front fees and trailing commissions that financial planners receive from fund managers for recommending particular investments and have to reveal.

The Australian Securities and Investments Commission has raised concerns that the rebates, and their potential influence on investment recommendations, are not being fully disclosed.

The money paid to financial planning groups is a percentage of the overall funds the financial planning group refers to investment managers, usually between 0.1 and 0.5 per cent.

In the case of Count, it received $20 million in rebates from investment managers in 2005-06, more than the $14 million it received in fees and commissions.

Mr Lambert said of the payments to franchisees that they were "in no way related to a product, it's in no way related to a [investment] platform. It's related to the total CTCs", CTCs being "contributions to Count".

But financial planning franchises who choose products with a greater rebate paid to Count automatically increase their "contributions to Count" and therefore their ability to exceed revenue targets for the issue of reward options.

This directly increases the number of options they receive in Count Financial's business. In 2005 franchisees were issued 8.2 million options in Count at a strike price of 12.5 per cent below the average share price in the week after Count's annual results. Options vest after three years.

A financial planner who previously worked at Count, who spoke on condition of anonymity, said the system favoured the issuing of investment recommendations that would lead to a greater number of options.

"It all depends on how much money you are making for Count," the planner said. "You tell me that doesn't influence investment recommendations."

© 2006 Sydney Morning Herald

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