AU2006100923A5 - Loyalty system for superannuation products - Google Patents

Description

O LOYALTY SYSTEM FOR SUPERANNUATION PRODUCTS 0 FIELD OF THE INVENTION This invention relates to loyalty systems for financial products and services, in particular to Oa system by which customers can be offered loyalty rewards in relation to superannuation investments.

BACKGROUND OF THE INVENTION 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 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 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 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 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 -2-

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Q services, or at least to provide an alternative to existing loyalty systems in the financial 0 products and services industry.

In one aspect the invention may broadly be said to reside in a computer implemented O 5 method of processing fees for advice given in relation to a superannuation product,

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0 including: receiving payment from a product provider for advice given by an advice IN provider to a customer of the product provider, transmitting a portion of the payment to the advice provider as a brokerage fee, service fee and/or commission for the advice, and transmitting a portion of the payment to a rewards provider as a marketing fee for providing loyalty rewards to the customer.

Preferably at least part of the marketing fee is determined in relation to funds placed in a superannuation product by the customer under advice of the advice provider. Preferably a loyalty reward is determined for the customer in relation to funds placed in a superannuation product by the customer under advice of the advice provider.

In another aspect the invention resides in a computer system for processing fees for advice given in relation to superannuation products, including a first subsystem which receives payments from at least one product provider for advice given by advice providers to customers of the product provider, a second subsystem which determines and transmits a portion of each payment to a respective advice provider as a brokerage fee, service fee and/or commission for the respective advice, and a third subsystem which determines and transmits a portion of each payment to a respective rewards provider as a marketing fee for providing loyalty rewards to the respective customer.

In more general terms, this specification also describes a system for providing a customer with a financial product, 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 -3- O advice provider pays fees to the rewards provider in accord with fees received from the 0 product provider.

m The financial product may be either a superannuation investment or a non-superannuation N 5 investment, and subject to restrictions that may apply in a particular country. Preferably

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Othe loyalty rewards are determined in relation to the funds placed in the product under IN advice of the advice provider (FUA).

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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 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.

LIST OF FIGURES Preferred embodiments of the invention will be described with respect to the 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, 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 Figure 4 is a flowchart outlining how the FSL processes data and makes corresponding payments to the LA and the LRPP.

O-4- O DESCRIPTION OF PREFERRED EMBODIMENTS 0 Referring to the drawings it will be appreciated that the invention may be implemented in a a range of different ways for a range of different purposes within the financial products and (,i N 5 services industry. The embodiments described here are given by way of example only. It 0 will be appreciated by a skilled reader that most of the transactions and other interactions Nbetween 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 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 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).

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 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 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 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 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 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 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 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 the loyalty arrangements can be made as required under these circumstances.

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 O-6- O calculate and distribute commissions and service fees in relation to a particular customer, O 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 n loyalty program. The fees 16 and 17 generally include an upfront or brokerage fee for the O 5 LA, due from the PP on commencement of a new product by a customer, and a regular

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Oadviser service fee or trail commission for the LA during the lifetime of the customer's IND investment in the product. The FSL will also generally send data to the LA in the form of

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Sa 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 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.

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 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 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 brokerage payment of 3% and a yearly service fee of paid on a monthly basis. The service fee includes a fee of 0.8% for payment to Lhe loyalty rewards provider LRPP for operation of the loyalty program. The adviser then forwards customer details 12, 13 to the

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-7product provider PP and the LRPP respectively. The PP forwards the agreed brokerage and service payments to the FSL which in turn makes corresponding payments to the LA less an agreed administration fee and to the LRPP 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.

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 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.

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.

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2.

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4.-13.

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16.

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19.-25.

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Lineidentifier Line Identifier. A code to represent the type of record. New Business, Trail Commission, and Asset Commission.

CustomerlD I Customer Identifier. A unique identifier for the customer.

CustomerlD2 Customer Identifier. A unique identifier for the customer.

Represents various customer details.

Agentreference Agent Reference. A unique identifier used to identify the Adviser.

AR Adviser Rate. Refers to the amount of the Adviser service fee that the Adviser has chosen to contribute to the Rewards program.

Dealer Financial Services Licensee.

Productprovider Product provider.

Represents various commission and service fee details.

Fundsunderadvice Funds Under Advice. Customer Funds that are under management, administration or advice of the Adviser.

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-8- O 27. Mrppayment Member Rewards Payment. Is the amount being forwarded 0 to the Rewards program provider by the FSL.

n 28. Mrpgstamount Member Rewards Payment Goods services tax amount.

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

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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 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 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 (4)

1. A computer implemented method of processing fees for advice given in relation to a a superannuation product, including: 5 receiving payment from a product provider for advice given by an advice provider O Sto a customer of the product provider, transmitting a portion of the payment to the advice provider as a brokerage fee, service fee and/or commission for the advice, and transmitting a portion of the payment to a rewards provider as a marketing fee for providing loyalty rewards to the customer.

2. A method according to claim 1 further including: determining at least part of the marketing fee in relation to funds placed in a superannuation product by the customer under advice of the advice provider.

3. A method according to claim 1 further including: determining a loyalty reward for the customer in relation to funds placed in a superannuation product by the customer under advice of the advice provider.

4. A method according to claim 1 further including: receiving a data statement from the product provider in relation to activity of the customer, and transmitting a data statement to the rewards provider based on the data statement received from the product provider. A computer system for processing fees for advice given in relation to superannuation products, including a first subsystem which receives payments from at least one product provider for advice given by advice providers to customers of the product provider, a second subsystem which determines and transmits a portion of each payment to a respective advice provider as a brokerage fee, service fee and/or commission for the respective advice, and a third subsystem which determines and transmits a portion of each payment to a respective rewards provider as a marketing fee for providing loyalty rewards to the respective customer.