Ashcourt Rowan is scrapping the 2 per cent referral fee for advisers that recommend its in-house discretionary service as part of a restructure of its remuneration strategy.
Last week, Ashcourt Rowan announced it will raise £8.5m in cash by offering new shares in the company alongside plans to cut costs by £5.2m a year.
Speaking to Money Marketing, group chief executive Jonathan Polin (pictured) says the remuneration structure for advisers is too expensive to maintain. The firm made a loss of £1.1m for the six months to September this year.
He says the firm’s 74 advisers have been earning a base salary, plus a percentage share of the revenue they generate, which increases on a sliding scale in line with revenue. Advisers’ salaries were based on their performance against objectives set out in a balanced scorecard. The objectives were tailored for each adviser and included revenue performance, compliance metrics and personal development, including CPD, training and competency.
Polin says the balanced scorecards have been scrapped while the 2 per cent referral fee for advisers that recommend Ashcourt Rowan’s in-house discretionary service to clients will also be axed. The firm is introducing a new pay structure which will see advisers take a share of the profit generated rather than the revenue.
Costs that advisers can control, such as the number of support staff they use, their work location, extra marketing spend as well as central costs that the company incurs such as professional indemnity insurance and compliance levies will be deducted from their revenue. Advisers will then get a percentage share of the remaining pot, plus their base salary.
Polin says other efforts to streamline the business will see wealth management subsidiary Savoy Investment Management merge into Ashcourt Rowan Asset Management.
Savoy will maintain its branding and will become a highnet-worth division for clients, offering bespoke portfolio management for clients with over £500,000 to invest. The two wealth management arms will share a pricing ratecard but prices have not been finalised.
Polin says: “By combining Savoy and Ashcourt Rowan Asset Management, we will get rid of a regulated entity and make savings by just doing one set of reporting and accounts.”
He says redundancies are a likely result of the cost-cutting measures but declined to give any details of the numbers to be affected.
He says: “If you are taking cost out of the business, part of that cost will be some areas of headcount because headcount is generally the biggest cost overall. I cannot reveal what redundancies will be made until I have informed the people involved.”
Polin plans to merge Ashcourt Rowan’s two offices in Bournemouth but he says jobs will not necessarily be lost as a result. He also plans to move the group on to one central operating platform.
Ashcourt Rowan will remain independent after the RDR, says Polin, and will move to an adviser-charging model between April and the end of 2012. He believes the group will be a natural beneficiary of advisers’ increasing use of discretionary fund managers.
He says: “More and more advisers who have been managing money on behalf of their clients feel that under the RDR they would rather outsource that work to discretionary fund managers. We are talking to lots of advisers on that basis at the moment. It is a huge growth area in the discretionary fund manager marketplace.”