Most advisors run their commission and fee tracking as a back office function with little or indeed no integration of this vital data into their everyday business.In our experience most advisors seem unaware of the “hidden treasure” that can be unearthed and put to good use in building an efficient and profitable business or if they are aware of it, they simply don’t know how to tackle this mammoth task.
Other than the obvious fact that the revenue is needed to run the business on a day to day basis, what are the other reasons advisors should be paying more attention to this function in their practices? Here are just a few:
- Building a debtor’s book to prepare business revenue projections to support future growth ;
- Understanding how each client contributes to the income of your business
- Being able to match client income to client service levels efficiently
- Making sure that what you expect to receive from product providers is what you actually receive
- Keeping track of business that falls off the books
- Assist in making your practice RDR ready
Very often the main barrier to putting commission data to good use is that the reconciliation process in the business is manual and time consuming. Spreadsheets and highlighters are the tools used and in the end the figures given on the provider commission statements are accepted as correct because the task of checking each entry is simply too big and the FSP practice has neither the time nor the resources to do so.
Also, many product provider commission statements are supplied in a format which does not allow for easy matching and tracking of information. This means that if the practice does decide to get serious about checking the commission receipts, they have to accept that the cost to the business will be a full time person whose only job will be commission tracking and reconciliation. For smaller FSPs this cost can be too high and in larger FSPs the amount of work involved exceeds what one person can handle resulting in additional staff being employed at additional cost and so on.
The truth of the matter is that the longer this task is left, the bigger it becomes and the less the advisor wants to tackle it. Added to this is that advisors are expected to be technical experts and understand the software systems on the market that can be used to track and reconcile commissions and fees. Even if a software system is successfully chosen, implementing it into the business and ensuring you have a trained person to operate the system is equally as daunting.
So what is the answer to getting a handle on this vital element of your business?
One way is to talk to an expert who can help you select and set up a commission system in your business as well as help you train an in house administrator but this option comes at a cost of system license fees and staff salary. If you are big enough and can afford the costs, then this could be a solution for you.
An alternative is to simply outsource this function to an expert for a set monthly fee and remove the hassle from your business altogether. This way you get to focus on your core business and the commission expert focusses on releasing and delivering the added value that your commission and fee data can give to your business. Talk to us at Linktank if you’d like to explore that option. It is also a good idea to complete an RDR Reality Check questionnaire to measure your firm’s readiness.