PosSol increases retention thresholds; ups minimum commission requirement

National IFA Positive Solutions is effectively increasing the charges it levies on some partners in an effort to offset rising regulatory costs and return to profit.

The Aegon-owned distribution business has told its 1,600 partners, while it has decided against upping its retention rates, it is increasing ‘retention thresholds’ by £5,000 across the board.

This means partners will have to find more income than previously if they want to climb an earnings band and therefore retain a larger chunk of profits.

For example, a partner bringing in £61k this year compared with £59k in 2009 would previously have done enough to keep an extra 5% of profits, as they had broken the £60k threshold.

But that same partner will now need to write £66k worth of business to do the same, as the threshold has jumped £5k to £65k.

In a separate move, the company has also increased its minimum income requirement on partners from £20,000 to £25,000 and confirmed it will impose an annual charge of £7,500 for those who don’t meet it.

This move was due to come in at the beginning of the year but has now been deferred until 1 June.

However, the change that impacts most partners is the shift in retention thresholds.

Positive Solutions CEO Jim Reeve has told partners the increasing costs of regulation, compliance, staff and professional indemnity (PI) insurance, on top of interim FSCS levies, are behind the threshold increases. Partners have already been told this year's Overseas Forum may be the last for a while.

Reeve adds the company, which last year posted a combined loss, with national IFA Origen, of £16m, has not increased its charges since Positive Solutions’ inception 13 years ago. He says company directors have also taken a pay cut in the last 12 months.

According to Positive Solutions, increasing retention thresholds, instead of rates, is a “simple but effective” move which, in a buoyant market, allows partners to “write their way out of any [charge]  increase”.

For example, it says if its average retention threshold is 20%, a partner could write £5,000 additional income, paying Positive Solutions £1,000 and retaining £4,000, leaving no effective increase in the percentage charged.

Experts say it is understandable businesses are looking to supplement their income as costs continue to mount.

“A number of firms during the deep recession took the commercial view to hold retention rates to help advisers through the storm,” financial services consultant Carey Shakespeare says.

“But you can’t go on like that because margins are very thin and the cost of regulation is going up. It is no surprise some firms are now demanding more from their advisers.”

Positive Solutions’ additional move to impose a minimum charge on partners writing less than £25,000 a year follows the company’s decision last year to scale back its partner numbers in a “focus on quality”.

Reeve has moved to reassure partners Positive Solutions still offers value for money, particularly given the alternatives open to IFA firms.

"We believe there is no other advisory business that does more to protect its partners, help them to grow themselves and their practices and prepare them for the post-RDR world," he says.