AU2004321507A1

AU2004321507A1 - Loyalty system for financial products

Info

Publication number: AU2004321507A1
Application number: AU2004321507A
Authority: AU
Inventors: Phillip Mostert; Kevin Lawrence Charles Stewart; Mark Linton Stewart; Russell Walker
Original assignee: FOUNTAIN GROUP HOLDINGS Pty LT
Current assignee: FOUNTAIN GROUP HOLDINGS Pty Ltd
Priority date: 2004-07-23
Filing date: 2004-07-23
Publication date: 2006-01-26
Also published as: WO2006007624A2

Description

WO 2006/007624 PCT/AU2004/000985 -1 LOYALTY SYSTEM FOR FINANCIAL PRODUCTS FIELD OF THE INVENTION 5 This invention relates to loyalty systems for financial products and services, in particular but not only to a system by which customers are offered loyalty rewards in relation to superannuation or non-superannuation investments. BACKGROUND OF THE INVENTION 10 A wide range of financial products such as superannuation are available in Australia and other developed countries. However, the advice and distribution of these products by providers such as banks is often strictly controlled by government or industry regulation. In Australia, the distribution of financial products is made through a financial services 15 licensee (FSL) which is authorised by the Australian Securities & Investments Commission (ASIC) under the Corporations Act 2001. ASIC enforces and regulates company and financial services laws to protect consumers, investors and creditors. Superannuation plans are tightly controlled in most countries because the investments are 20 to provide for retirees and are normally subject to significant tax concessions. In Australia, one of the regulations in the operation of a superannuation fund is to meet the "sole purpose" test which requires that the money invested be maintained for the sole purpose of providing benefits to the members on their retirement, death, or reaching a prescribed age. Some ancillary benefits are possible, relating to disablement for example. In general 25 however, it is not permitted to provide other benefits such as loyalty rewards from a superannuation fund to its members in Australia. SUMMARY OF THE INVENTION 30 It is an object of the invention to provide a system that enables customers of providers of financial products and services to be offered loyalty rewards in relation to superannuation WO 2006/007624 PCT/AU2004/000985 -2 and non superannuation investments and services, or at least to provide an alternative to existing loyalty systems in the financial products and services industry. In one aspect the invention is a system for providing a customer with a financial product, 5 including: an advice provider who advises the customer in relation to the financial product, a product provider which receives funds from the customer for placement in the product, and a rewards provider which provides the customer with loyalty rewards in relation to the product, wherein the product provider pays fees to the advice provider in accord with the funds received from the customer, and the advice provider pays fees to the rewards 10 provider in accord with fees received from the product provider. The financial product may be either a superannuation investment or a non-superannuation investment, and subject to restrictions that may apply in a particular country. Preferably the loyalty rewards are determined in relation to the funds placed in the product under 15 advice of the advice provider (FUA). In one embodiment, the advice provider includes a financial services licensee (FSL) and fees are paid by the product provider to the FSL as a proportion of the FUA held by the product provider for the customer. The advice provider further includes at least one 20 licensed adviser (LA) and a proportion of the fees paid by the product provider to the FSL are paid to the LA. The FSL also makes payment to a loyalty rewards provider which in turn provides loyalty rewards to the customer as a proportion of the funds received from the customer by the product provider. 25 In another aspect the invention is a method of advising in relation to financial products, including: providing advice to a customer regarding a product and offering loyalty rewards to the customer, directing payment from the customer to a product provider for placement in the product, receiving payment from the product provider in relation to the advice given to the customer, and paying a rewards provider in relation to loyalty rewards that will be 30 received by the customer.

WO 2006/007624 PCT/AU2004/000985 -3 In a further aspect the invention is a method of providing a financial product to a customer, including: receiving funds from the customer for placement in the product, and making a payment to a financial adviser in accord with the funds received from the customer, wherein the payment to the adviser represents work done by the adviser in relation to the 5 customer, and wherein of the payment to the adviser a portion represents a payment that will be made by the adviser to a rewards provider in relation to loyalty rewards for the customer. In yet another aspect the invention is a method of delivering loyalty rewards, including: 10 receiving payment from a financial adviser, and providing loyalty rewards to a customer of the adviser in accord with the payment, wherein a portion of the payment from the adviser is determined by funds placed in a 'financial product by the customer, and wherein a portion of the payment from the adviser represents an administration fee in relation to the provision of loyalty rewards. 15 In a further aspect the invention is a method of investing in a financial product, including: receiving advice from a financial adviser in relation to a product offered by a product provider, making one or more payments to the product provider for investment in the product, and receiving loyalty rewards from a rewards provider in relation to the funds 20 placed with the product provider under advice of the adviser. LIST OF FIGURES Preferred embodiments of the invention will be described with respect to the 25 accompanying drawings, of which: Figure 1 schematically shows a system for exchange of information and payments between participants in a loyalty arrangement, Figure 2 gives an example of the system in action with specific values placed on the payments, including fees to a licensed adviser LA, 30 Figure 3 is a data table indicating the contents of a typical electronic file that enables the flow of useful data between PP, FSL and LRPP as in Figure 1. and WO 2006/007624 PCT/AU2004/000985 -4 Figure 4 is a flowchart outlining how the FSL processes data and makes corresponding payments to the LA and the LRPP. DESCRIPTION OF PREFERRED EMBODIMENTS 5 Referring to the drawings it will be appreciated that systems according to the invention may be implemented in a range of different ways for a range of different purposes within the financial products and services industry. The embodiments described here are given by way of example only. It will be appreciated by a skilled reader that most of the 10 transactions and other interactions between the various parties will be carried out in conventional ways, typically but not necessarily over the Internet between computers operated by the parties or their agents. Figure 1 indicates how a customer C purchases or subscribes to a financial product such as 15 a superannuation plan or other type of investment and becomes part of a rewards program administered by a loyalty rewards program provider LRPP. The customer initially receives advice 10 regarding the product from a licensed adviser LA who in turn works in conjunction with, or as a representative of, a financial services licensee FSL. The adviser provides information about one or more products offered by a product provider PP and 20 assists the customer to make a decision and a subscription to a particular product. The rewards received by the customer are linked to this advice and are calculated according to the funds placed in the product as a consequence of the relationship between the customer and the adviser, often referred to in the financial products and services industry as Funds Under Management or Funds Under Advice (FUA). 25 In Figure 1, a range of distribution networks can exist in the form of different relationships between the product provider PP, the financial services licensee FSL and the licensed adviser LA. In some cases the FSL may simply be a department of the PP, with the LA being a commission/service fee representative or an employee of the FSL. On the other 30 hand, the FSL may be an entirely separate business organisation that is engaged by the PP for specific purposes, and the LA may in turn be an individual agent engaged to represent WO 2006/007624 PCT/AU2004/000985 -5 the FSL. A large bank might operate an in-house customer sales and service group for financial products, whereas a smaller financial organisation might engage a number of external FSLs for different purposes, with each FSL providing services to a number of different organisations. An FSL may include a large number of operators or may only 5 involve a single person who is then effectively also the LA. The adviser LA in Figure 1 may interact with the customer C in a number of ways regarding a particular financial product, typically by meeting in person or talking over the phone. In some cases, the adviser may work with the customer entirely or partly through a 10 website or by email. They form a business relationship although not necessarily a contract. Statutory guidelines usually exist to cover this interaction, such as the requirements of 'know the customer' and full disclosure of fees. The customer provides data 11 as requested by the adviser, and the adviser either prepares or assists the customer to prepare documents required by the product provider PP and the rewards provider LRPP. As a 15 result of this process either the adviser or the customer typically sends an application form containing data 12 to the PP, to commence a subscription to a selected financial product, and an application form containing data 13 to the LRPP, to commence a rewards program. The customer C in Figure 1 sends funds 14 to the provider PP of the financial product 20 about which the adviser LA has given advice. The money is paid by the customer to the product provider according to the terms of the product, as a lump sum and/or regular instalments for example, to form the FUA. The product provider accepts the payment and enters the customer details in a database thereby forming a contract with the customer. It then administers and manages the product on behalf of the customer, until retirement in the 25 case of superannuation for example, and retains an administration fee for doing so, in accord with the contract. In some cases the customer may decide to divert funds from one product to another, such as between products offered by a common provider, or between products offered by different providers. In other cases the customer may switch from one adviser to another, in relation to the same or different products. Appropriate adjustments to 30 the loyalty arrangements can be made as required under these circumstances.

WO 2006/007624 PCT/AU2004/000985 -6 The product provider PP in Figure 1 generates a regular data file 15 for the FSL. In general, there will be multiple customers involved with different products and perhaps multiple FSLs. The data file contains a range of information that is required by the FSL to calculate and distribute commissions and service fees in relation to a particular customer, 5 typically on a monthly basis. The PP pays fees 16 to the FSL generally in dependence on the FUA, including fees 17 for the LA, and marketing payments 18 to the LRPP for the loyalty program. The fees 16 and 17 generally include an upfront or brokerage fee for the LA, due from the PP on commencement of a new product by a customer, and a regular adviser service fee or trail commission for the LA during the lifetime of the customer's 10 investment in the product. The FSL will also generally send data to the LA in the form of a regular statement. The financial services licensee FSL in Figure 1 receives data 15 and fees 16 from the product provider PP, generally on a regular basis, as mentioned above. The FSL forwards 15 the appropriate brokerage and trail fees 17 to the LA, forwards the marketing fees 18 to the LRPP, and retains an administration fee for doing so, as per contractual arrangements with the PP, the LA and LRPP. The FSL also processes the data from the PP and forwards a processed file 19 to the LRPP. 20 The loyalty rewards program provider LRPP in Figure 1 receives fees 18 and data 19 from the FSL, also generally on a regular basis. The LRPP administers a rewards program for the customer based on the data received from the FSL and issues points or other reward benefits according to data 13. The LRPP operates a Redemption and Fulfilment Facility (RFF) either directly or outsourced to another party (not shown). In general, the LRPP 25 administers such programs for a large number of individuals on behalf of the FSL/LA, and in turn for a large number of FSLs and advisers. Figure 2 is an example of a specific financial arrangement between the parties shown in the system of Figure 1. The customer C wishes to make a lump sum investment of $80,000 30 perhaps as superannuation for example, and seeks advice from the adviser LA. The customer provides details 11 and negotiates an agreement with the adviser, including a WO 2006/007624 PCT/AU2004/000985 -7 brokerage payment of 3% and a yearly service fee of 1.2%, paid on a monthly basis. The service fee includes a fee of 0.8% for payment to the loyalty rewards provider LRPP for operation of the loyalty program. The adviser then forwards customer details 12, 13 to the product provider PP and the LRPP respectively. The PP forwards the agreed brokerage 5 (3%) and service payments (1.2%) to the FSL which in turn makes corresponding payments to the LA (3% & 0.4%), less an agreed administration fee (15%), and to the LRPP (0.8%). The LRPP converts the fee received from the FSL into loyalty rewards for the customer, less an administration fee of 20% of the amount converted. 10 Figure 3 is a data table indicating the contents of a typical electronic file that enables the flow of data between the PP, FSL and LRPP as in Figure 1. The file includes information 12 provided by the adviser LA to the PP and is transmitted electronically by the PP to the FSL for processing as shown in Figure 4. The content of the file is data that enables operation of relevant payment and data flows shown in Figure 1. In this example, the file 15 relates to a customer by the name of Joe Sample who has an amount of $262,771 with XYZ Products, as funds under advice by an LA named Tom Smith, with an FSL named Sample Securities. The fees 17 paid by the FSL to the LA are represented in various formats shown as items 19-25. The payment made to the LRPP by the FSL is represented as item 27, namely $192.70. 20 The data shown in Figure 3 is in a generic format for adoption by FSL's. The PP provides this data in a format which is dictated by the FSL and the FSL in turn provides the data required by the LRPP. A glossary of the data file terms in Figure 3 follows below. 25 1. Lineidentifier = Line Identifier. A code to represent the type of record. 'N' - New Business, 'T' - Trail Commission, and 'A' - Asset Commission. 2. CustomerID 1 = Customer Identifier. A unique identifier for the customer. 3. CustomerlD2 = Customer Identifier. A unique identifier for the customer. 30 4. - 13. Represents various customer details. 14. Agentreference = Agent Reference. A unique identifier used to identify the Adviser. 16. AR = Adviser Rate. Refers to the amount of the Adviser service fee that the Adviser has chosen to contribute to the Rewards program. 35 17. Dealer = Financial Services Licensee.

WO 2006/007624 PCT/AU2004/000985 -8 18. Productprovider = Product provider. 19. -25. Represents various commission and service fee details. 26. Fundsunderadvice = Funds Under Advice. Customer Funds that are under management, administration or advice of the Adviser. 5 27. Mrppayment = Member Rewards Payment. Is the amount being forwarded to the Rewards program provider by the FSL. 28. Mrpgstamount = Member Rewards Payment Goods & services tax amount. 10 Figure 4 is a flowchart outlining how the FSL processes the data file indicated in Figure 3 and makes corresponding payments to the LA and the LRPP as shown in Figure 1. In step 40, the FSL receives the data file 15 from the PP along with a payment 16, typically at monthly intervals. The file is typically a spreadsheet transmitted electronically between 15 computers operated by the PP and the FSL. A validation process 41 & 42 is then applied to the file that includes data integrity check. In step 43 a statement and fee 17 are transmitted to the LA while in step 44 a portion of the payment is retained by the FSL as an administration fee. Data 19 and a payment 18 are transmitted to the LRPP in step 45. 20 It will be appreciated that the invention provides a means by which loyalty benefits may be provided in relation to funds under advice by a licensed adviser, without breaching official requirements such as the "sole purpose test" that may exist in some countries.

Claims

1. A system for providing a customer with a financial product, including: an advice provider which advises the customer in relation to the financial product, 5 a product provider which receives funds from the customer for placement in the product, and a rewards provider which provides the customer with loyalty rewards in relation to the product, wherein the product provider pays fees to the advice provider in accord with the 10 funds received from the customer, and the advice provider pays fees to the rewards provider in accord with fees received from the product provider.

2. A system according to claim 1 wherein the loyalty rewards are determined in 15 relation to the funds placed in the product under advice of the advice provider.

3. A system according to claim 1 wherein the advice provider includes a financial services licensee (FSL) and fees are paid by the product provider to the FSL as a proportion of the funds held by the product provider for the customer. 20

4. A system according to claim 3 wherein the advice provider includes at least one licensed adviser (LA) and a proportion of the fees paid by the product provider to the FSL are paid to the LA. 25

5. A system according to claim 3 wherein fees are paid to the rewards provider by the FSL as a proportion of the funds held for the customer by the product provider.

6. A system according to claim 1 wherein the loyalty rewards are given to the customer by the rewards provider as a proportion of the funds received from the customer 30 by the product provider. WO 2006/007624 PCT/AU2004/000985 - 10

7. A method according to claim 1 wherein loyalty rewards are calculated either as a proportion of the overall funds held by the product provider for the customer or as a proportion of individual payments made by the customer to the product provider. 5

8. A system according to claim 1 wherein the financial product is a superannuation investment or a non-superannuation investment.

9. A system according to claim 1 wherein the product provider receives funds from the customer in relation to one or more products and in relation to advice from one or more 10 advice providers.

10. A method of advising in relation to financial products, including: providing advice to a customer regarding a product and offering loyalty rewards to the customer, 15 directing payment from the customer to a product provider for placement in the product, receiving payment from the product provider in relation to the advice given to the customer, and paying a rewards provider in relation to loyalty rewards that will be received by the 20 customer.

11. A method according to claim 10 wherein the loyalty rewards are determined in relation to funds under advice placed in the product by the customer. 25

12. A method according to claim 10 wherein the payment from the product provider includes a regular fee calculated as a proportion of the funds held by the product provider for the customer.

13. A method according to claim 10 wherein the rewards provider is paid a regular fee 30 calculated as a proportion of the funds held by the product provider for the customer. WO 2006/007624 PCT/AU2004/000985 - 11

14. A method according to claim 10 wherein the advice is provided to the customer by a licensed advisor (LA) in cooperation with, or as a representative of, a financial services licensee (FSL) and the payment from the product provider is received by the FSL with a corresponding payment being made by the FSL to the LA. 5

15. A method according to claim 10 wherein the financial product is a superannuation investment or a non-superannuation investment.

16. A method according to claim 10 wherein the advice relates to two or more financial 10 products.

17. A method of providing a financial product to a customer, including: receiving funds from the customer for placement in the product, and making a payment to a financial adviser in accord with the funds received from the 15 customer, wherein the payment to the adviser represents work done by the adviser in relation to the customer, and wherein of the payment to the adviser a portion represents a payment that will be made by the adviser to a rewards provider in relation to loyalty rewards for the customer. 20

18. A method according to claim 17 wherein the payment to the adviser is a regular fee calculated as a proportion of the funds held for the customer by the product provider.

19. A method according to claim 17 wherein the payment to the rewards provider is a 25 regular fee calculated as a proportion of the funds held for the customer by the product provider.

20. A method according to claim 17 wherein the product is a superannuation investment or a non-superannuation investment. 30

21. A method of delivering loyalty rewards, including: WO 2006/007624 PCT/AU2004/000985 -12 receiving payment from a financial adviser, and providing loyalty rewards to a customer of the adviser in accord with the payment, wherein a portion of the payment from the adviser is determined by funds placed in a financial product by the customer, and 5 wherein a portion of the payment from the adviser represents an administration fee in relation to the provision of loyalty rewards.

22. A method according to claim 21 wherein the loyalty rewards are determined as a proportion of the funds placed in the financial product under advice of the advisor. 10

23. A method of investing in a financial product, including: receiving advice from a financial adviser in relation to a product offered by a product provider, making one or more payments to the product provider for investment in the 15 product, and receiving loyalty rewards from a rewards provider in relation to the funds placed with the product provider under advice of the advisor.

24. A method according to claim 23 wherein the loyalty rewards are given regularly to 20 the customer and calculated as a proportion of the funds held for the customer by the product provider.

25. A method according to claim 23 wherein the adviser is paid a fee by the product provider in relation to the investment made by the customer. 25

26. A method according to claim 23 wherein the rewards provider is paid a fee by the adviser in relation to the investment made by the customer.

27. A method according to claim 23 wherein the product is a superannuation 30 investment of a non-superannuation investment.