MAKE TOMORROW, TODAY

SCORECARD KEY PERFORMANCE INDICATORS (KPls) - 2017

GOVERNING RULES AND GUIDELINES FINANCIAL ADVISER - STRATEGIC

FEBRUARY 2017

Version 1.0

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CONTENTS

1. Background ............................................................................................................... 2

2. Financial Advisers - Strategic .................................................................................... 3• Financials - Weighting 70% ................................................................................. 3

KPI: Achievement of financial targets (60%): .................................................... 3KPI: Staying on track (10%): ............................................................................. 3

• Non – Financials - Weighting 30% ....................................................................... 4KPI: Revenue Forecasting (20%) ..................................................................... 4KPI: Management of Aged debtors (5%) .......................................................... 4KPI: Ongoing Fee Management (5%) ............................................................... 4

• Other ................................................................................................................... 5KPI: Team Participation ..................................................................................... 5KPI: Gateway ................................................................................................... 5KPI: Errors and Omissions (E&Os) .................................................................... 5

3. Definitions ................................................................................................................. 6

4. Appendices ............................................................................................................... 8• Appendix 1: Financial Targets ............................................................................. 8• Appendix 2: Staying on Track .............................................................................. 9• Appendix 3: Revenue Forecasting ..................................................................... 10• Appendix 4: Example PfS Rating ....................................................................... 11• Appendix 5: Full Year Result and Forecasted Figures ....................................... 12

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1BackgroundIn 2017 we will operate KPIs for our Strategic Advisers, who provide ongoing advice to clientswith comprehensive financial advice needs, with reference to the following principles:

All client-facing Mercer staff has

1. 70% of their scorecard based on achievement of financial targets and this applies to allstrategic financial advisers. This is split by:

(a) 60% achieving financial targets(b) 10% staying on track to financial targets at the end of each quarter

2. 30% of the scorecard will be based on Non-Financials objectives which will be defined foreach team, and individual.

3. Scorecard targets must be clear, measurable and achievable, and linked to Client Servicesand Financial Advice business objectives.

4. PFS ratings must be linked to scorecard targets, noting that 70% is based on financialoutcomes. Ratings must be fair and reasonable.

5. Team Leaders will agree scorecard targets for each member of their team, and they will berequired to monitor and report on progress monthly.

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2Financial Advisers - StrategicKPIs will include:

· A financial target based on new business and ongoing service revenue.· Remaining on track to new business and ongoing service targets.· Compliance culture.

Financials - Weighting 70%

KPI: Achievement of financial targets (60%):

1. This target will be expressed as new business revenue (NBR) and annualised new ongoingrevenue (OSP). Performance measurement comprises of:

· An 85% hurdle rate applied to both NBR and OSP targets.

· If financial results fall short at the end of each reporting period against either NBR and/orOSP hurdles, a 20% deduction is applied to the actual amount. Refer to the example inAppendix 1.

2. E&Os will be tracked for both frequency and dollar impact throughout the year. The finaloutcome of each E&O will be assessed and the direct dollar impact of revenue lost to MFAof those may be attributable to an individual or team impacting the revenue measure inindividual or team scorecards.

KPI: Staying on track (10%):

Advisers will be rewarded at the maximum of 13% for staying on track against their financialtargets and is measured at the end of each quarter. The annual result then weighted against thePfS scorecard of 10%.

For 2017, this calculation will not be applied in Q1; however the weighting in Q2 doubled.

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This is calculated by multiplying the individual scorecard YTD results at the end of each quarterby the maximum of 3.25% (13% divided by 4 = 3.25%). At the end of Q4, the results are totalledto provide an annual result and weighted against 10% of the PfS scorecard. Refer to Appendix2 for an example.

Non – Financials - Weighting 30%

KPI: Revenue Forecasting (20%)

MFA Leadership utilises Salesforce data on a monthly basis to forecast revenue therefore it iscritical the information entered into Salesforce is current and correct.

Advisers will be rewarded for accurate forecasting in Salesforce with a maximum YTD score of26%. For each 10% increments in your variance a deduction of 2.6% will be applied from themaximum score.

This measurement applies to NBR only and excludes insurance and OSP revenue. Theforecasted figures will be captured from Salesforce on or around the 10th business day of eachmonth. The absolute values between the actual and forecasted revenue will be summed at theend of each month to provide the YTD score.

Please refer to Appendix 3 for an example.

KPI: Management of Aged debtors (5%)

The management of the payment of invoices by clients is measured via monthly reporting on thenumber of outstanding accounts past 60 days. The management of invoices is 5% of theAdvisers PfS weighting, with a maximum of 6.5% available.

As Advisers operate under different structures (i.e. GESB and SMSF) and the number ofinvoices varies, this KPI will be measured subjectively. On a quarterly basis, MFA LeadershipTeam will assess the quarterly performance of each Adviser and assign a rating of 1 – 5 to theAdviser. An annual assessment will take place to determine the Advisers overall rating.

KPI: Ongoing Fee Management (5%)

Advisers whose clients are on an Ongoing Service fee arrangement are to meet the minimumbenchmark requirements. If the fee for a client falls below the minimum fee, this is known as afee gap and is reported on a monthly basis. Advisers are to maintain the management and

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relationship of fees paid by clients. The management of fee gaps is 5% of the Advisers PfSweighting, with a maximum of 6.5% available.

As Advisers have different size client base, this KPI will be measured subjectively. On aquarterly basis, MFA Leadership will assess the quarterly performance of each Adviser andassign a rating of 1 – 5 to the Adviser. An annual assessment will take place to determine theAdvisers overall rating.

Other

KPI: Team Participation

MFA Leadership will assess this KPI and has the right to increase or decrease an Advisersoverall scorecard result by 10%. This is based on the Advisers displaying team orientatedperformance at all times through and the support of colleagues as demonstrated by:

· Mentoring colleagues,· Peer review as required,· Prepared contribution at team meetings and· Involvement in Mercer initiatives and projects.

This will be monitored throughout the year and a total rating will be assessed in Q4.

KPI: Gateway

Compliance ratings and Continuing Professional Development are the gateways.

1. A compliance rating of < 12 months will make an adviser ineligible to achieve anyincentive for that year. An adviser with two consecutive 6 month ratings will be placedon automatic performance management. Three consecutive 6 month ratings will result ina Final Warning Letter.

2. Advisers must complete 40 hours of Continuing Professional Development on a financialyear basis of July 1 – June 30. Failure to complete will impact PfS and may also impactthe authorization of the adviser to provide personal advice.

KPI: Errors and Omissions (E&Os)

E&Os will be deducted from an Advisers scorecard if deemed appropriate by MFA Leadership.Refer to KPI: Achievement of Financial Targets for more information.

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3Definitions

KPI Cycle & Amendments:KPI Targets will be communicated to Financial Advisers as soon as is practicable at the start ofthe year. Significant unpaid or lifestyle leave must be approved prior to the year commencing ifa KPI reduction is to be considered.

There are no KPI Targets and adjustments for advisers involved in special projects

KPI performance shall be measured over the period from 4 January 2017 till 31 December 2017.Mercer reserves the right to alter the close off date as necessary to align with global year endHR processes.

Mercer also reserves the right to modify KPIs and targets at any time, with or without advancenotice.

Lost inherited clients:Advisers who transfer clients to other advisers have a responsibility to ensure a smooth transfer.If a client is lost within three months of transfer*, the loss of both client and associated revenuewill be recorded against the transferring adviser, as opposed to the new adviser, subject toTeam Leader discretion.

The amount deducted will be the annualised OSP (actual revenue they are paying). Deceasedestates are excluded.

*The loss of the client will be reviewed based on adequate service provided by the transferringAdviser along with client financial strategy. For example, if a client withdraws funds to purchasea property the loss will be excluded.

Measure:New Ongoing Service Packages are measured by an ATP uploaded to Xplan with a Threadinitiated. Lost clients shall be monitored and must be reported via a Lost Client Xplan Thread, itis the adviser’s responsibility to ensure records are correct, manual audits may take place toensure the integrity of these records. Lost client ongoing service revenue will be measured onthe date of exit.

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New Business Revenue is defined as:• Upfront fees (Upfront fees include: Invoices, Brokerage, Investment and Insurance

placements, brokerage from direct shares and referral fees for Lending.)• Time cost revenue• Annualised ongoing revenue from new DSP clients

Ongoing Product Revenue Rules:• Mercer Portfolio Service (MPS): Only the ongoing adviser fee (excluding Colonial and

expense recovery fees) paid to Mercer count towards the cost of an ongoing servicepackages.

Ongoing Service Revenue is defined as• Annualised ongoing revenue from NEW OSP clients• The annualised difference between what a Flexible or Direct Service client is currently

paying and the revised ongoing service fee where clients require a new type of ongoingservice relationship.

• An increase in revenue from existing ongoing clients as a result of new assets (min$100k additional funds). The additional amount will be counted towards the target. Thisexcludes regular contributions or borrowed funds.

Referrals:Referrals between advisers will be rewarded with up to 30% of the fees allocated to the referringadviser for identifying the opportunity. The exact amount should be based on the level of effortand outcome, and is to be agreed upon between the two advisers and signed off by the TeamLeader.

Target revenue; what will be deducted:• Unpaid upfront invoices more than 60 days old.• Lost clients whether they leave Mercer or terminate the ongoing service. The amount will

be based upon the annualised ongoing revenue generated by the lost client at time ofleaving or termination of the OSP.

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4Appendices

Appendix 1: Financial Targets

Adviser A has an annual NBR target of $150,000.00 and an OSP annualised target of$50,000.00. The NBR and OSP hurdle is 85%. The results from months 1 - 3 are shown below:

Month Result NBR Result OSPMonth 1 2,500.00 5000.00Month 2 7,800.00 2,500.00Month 3 6,900.00 6,600.00

Adviser A’s monthly performance to target expressed below:

Month 1 YTDTarget

YTDHurdle

YTDResult

20%deduction

YTD Result(Adj) % to target

NBR 12,500.00 10,625.00 2,500.00 500.00 2,000.00OSP 4,166.67 3,541.67 5,000.00 0.00 5,000.00Total 16,666.67 14,166.67 7,500.00 500.00 7,000.00 42%

Month 2 YTDTarget

YTDHurdle

YTDResult

20%deduction

YTD Result(Adj) % to target

NBR 25,000.00 21,250.00 10,300.00 2,060.00 8,240.00OSP 8,333.33 7,083.33 7,500.00 0.00 7,500.00Total 33,333.33 28,333.33 17,800.00 0.00 10,240.00 31%

Month 3 YTDTarget

YTDHurdle

YTDResult

20%deduction

YTD Result(Adj) % to target

NBR 37,500.00 31,875.00 17,200.00 3,440.00 13,760.00OSP 12,500.00 10,625.00 14,100.00 0.00 14,100.00Total 50,000.00 42,500.00 31,300.00 3,440.00 27,860.00 56%

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Appendix 2: Staying on Track

Adviser A's full year result shown below based on their quarterly results of (Refer to Appendix 5 for Adviser As full year result):

Quarterly Quarterly Scorecard

%Against Score

Quarter Target Adjusted Result Quarterly Staying on

(NBR + OSP) (20% applied) Result Track Target ($) (%)

~ 01 NIA as scorinc will commence in O?

02 100,000.00 61,587.20 62% I 4.03% 4.03% I 03 150,000.00 129,686.00 86% ? R1 0/n ? R1 O/n (s) 04 200,000.00 207,303.00 104% I 3.37% 3.25% -

Total 10.09%

As the calculation of Staying on Track commences in 02 and weighting doubled, the score of 4.03% is achieved (ref A). This is calculated by:

62% x 6.50% = 4.03%

Adviser As 04 scorecard result is 104%, their end of 04 Staying on Track result will be:

104% x 3.25% = 3.37%

As 3.25% is the maximum score attainable each quarter (with the exception of 02), the 3.25% will be applied (ref B).

The annual score of 10.09% is achieved by Adviser A. This is calculated by summing each quarters score. The annual score is used to determine the KPI weighting of 10% in the Advisers PfS scorecard.

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Appendix 3: Revenue Forecasting

Adviser A had entered into Salesforce as either Committed or Completed the following for theirNBR and their forecast was captured on the 10th of each month.

Month Forecast NBRMonth 1 1,200.00Month 2 8,000.00Month 3 5,500.00

Adviser As actual NBR results shown below.

Month Result NBRMonth 1 2,500.00Month 2 7,800.00Month 3 6,900.00

Their forecast to revenue YTD score is calculated as:

Month NBR Forecast NBR Actual Variance ($) Variance (%) ScoreMonth 1 1,200.00 2,500.00 1,300.00Month 2 8,000.00 7,800.00 200.00Month 3 5,500.00 6,900.00 1,400.00YTD Total 14,700.00 17,200.00 2,900.00 19.73% 20.87%

The variance from each month will be summed and the annual score will be used to determinethe KPI weighting in Adviser as PfS scorecard.

The score is calculated by:

Variance % = Total YTD summed Variance / NBR YTD ForecastTotal Deviation = Variance % / 10Total Deduction = Total Deviation x 2.6Score = Maximum Score – Total Deduction

Using the example above the YTD score of Adviser A is 20.87%. This is calculated as shownbelow:

Variance % = 2,900 /14,700 = 19.73%Score = 26% - 19.73% = 20.87%

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Appendix 4: Example PfS Rating

Below is an example of Adviser As annual PfS rating calculation. Please refer to Appendix 5 for Adviser As full you result.

PFS Adviser Score W . ht PFS Notes

eig Weight

FINANCIALS

Achievement of Financial Target 103.65%

Staying on Track

NON - FINANCIALS

Forecasting of revenue

Ongoing Fee Management

Aged Debtors

OTHER

CPD

Compliance Audit

E&O

T earn Participation

PFS Rating*

* PFS Rating Range

PFS Weight Range

<85%

86%-100%

101%-114%

115%-129%

130%

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19.73%

PFS Rating

2

3

4

5

60% 62.19%

10% 10.09%

20% 20.87%

6.50% Management assigned the maximum of

6.50% 6.5% due to no Fee gaps or bad debts incurred by the Adviser.

Pass Adviser completed 40 CPD points

Pass Adviser maintained a 12 months compliance rating.

NIA No deduction taken place.

Management assigned an additional 5% due +5% to Adviser actively involved in the roll out of

a project.

Total 111.15%

3

11

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Appendix 5: Full Year Result and Forecasted Figures

Adviser A's Full Year financial result .......................... Jan 12,500.00 4,166.67 16,666.67 10,625.00 3,541.67 2,500.00 5,000.00 500.00 2,000.00 5,000.00 7,000.00

Feb 25,000.00 8,333.33 33,333.33 21 ,250.00 7,083.33 10,300.00 7,500.00 2,060.00 8,240.00 7,500.00 15,740.00

Mar 37,500.00 12,500.00 50,000.00 31,875.00 10,625.00 17,200.00 14,100.00 3,440.00 13,760.00 14,100.00 27,860.00

Apr 50,000.00 16,666.67 66,666.67 42,500.00 14,166.67 25,466.00 8,953.00 5,093.20 20,372.80 1,790.60 7,162.40 27,535.20

May 62,500.00 20,833.33 83,333.33 53,125.00 17,708.33 38,119.00 15,562.00 7,623.80 30,495.20 3, 112.40 12,449.60 42,944.80

Jun 75,000.00 25,000.00 100,000.00 63,750.00 2t,250.00 56,602.00 20,382.00 11,320.40 45,281.60 4,076.40 16,305.60 61,587.20

Jul 87,500.00 29,166.67 116,666.67 74,375.00 24,791 .67 64,552.00 30,702.00 12,910.40 51 ,641.60 30,702.00 82,343.60

Aug 100,000.00 33,333.33 133,333.33 85,000.00 28,333.33 91,213.00 23,274.00 91,213.00 4,654.80 18,619.20 109,832.20

Sep 112,500.00 37,500.00 150,000.00 95,625.00 31,875.00 93,635.00 54,778.00 18,727.00 74,908.00 54,778.00 129,686.00

Oct 125,000.00 41,666.67 166,666.67 106,250.00 35,416.67 109,850.00 54,778.00 109,850.00 54,778.00 164,628.00

Nov 137,500.00 45,833.33 183,333.33 116,875.00 38,958.33 124,881.00 66,455.00 124,881.00 66,455.00 191,336.00

Dec 150,000.00 50,000.00 200,000.00 127,500.00 42,500.00 140,848.00 66,455.00 140,848.00 66,455.00 207,303.00

Adviser A's NBR full year forecast figures

----·i'··-----1,200.00 8,000.00 5,500.00 8,300.00 12,500.00 20,300.00 5,500.00 30,000.00 2,500.00 15,900.00 15,000.00 16,000.00 140,700.00

Actual 2,500.00 7,800.00 6,900.00 8,266.00 12,653.00 18,483.00 7,950.00 26,661 .00 2,422.00 16,215.00 15,031.00 15,967.00 140,848.00

Variance 1,300.00 200.00 1,400.00 34.00 153.00 1,817.00 2,450.00 3,339.00 78.00 315.00 31.00 33.00 11 ,150.00 8%

Total 23.92% Score

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Mercer (Australia) pty Ltd One International Towers Sydney 100 Barangaroo Ave, Sydney NSW 2000 Australia +6128864 8888

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