Deposit Cost of Funds Rule
Concept
When adding a new deposit, there are rules regarding the
combination of Interest Profile, Override Rate and Commission Matrix. These
rules are to ensure that the cost of funds to the business is no more than the
rate of interest associated with the selected interest profile and the default
commission rate associated with a broker.
Each
deposit has an interest profile added to it.
Associated with that will be an interest rate. When adding a new deposit the interest
profile rate will become the override rate on the deposit. The override rate may be increased to provide
a better return to the client. It may
never be decreased below the associated interest profile rate.
Associated
with the account will be a commission matrix for the broker/advisor. If left blank, brokerage will be calculated
from the matrix specified at the time the calculation run is processed at the
end of each month. If the override rate
is increased, then the brokerage rate must decrease to compensate. The brokerage rate decrease will take place
by the user selecting a different commission matrix.
The
interest rate on the interest profile plus the brokerage rate must equal the
interest override rate plus the decreased brokerage rate.
Example 1
Rate | ||
Interest Profile Interest Rate | 10.0% | A |
| Override Interest Rate | 10.5% | B |
Broker Standard Rate (ex the default commission matrix associated with the broker account) | 1.0% | C |
Broker actual commission rate | 0.5% | D |
The
test will be that A+C = B+D or 10.00 + 1.0 = 10.5 + .5
Once
the deposit account setup has been completed, and the 
button pressed, an error message will display
if this test fails
For
example:
It
will not be possible to an account unless the test is true
After
initial setup if the account is changed, the same test will still apply
Example 2
This account is set up with:
Rate | |
Interest Profile | Term Deposit 12% |
Override Rate | 12.00% |
Dealer | Demo Finance Ltd |
Term | 12 Months |
It
can be seen that the interest rate associated with this profile is 12.00%
The
Override has not been changed so this is also 12.00%
The
Dealer Account is Demo Finance Ltd, and that has a default brokerage Commission
Matrix attached to it of AEGIS
This
deposit is for a term of 1 year, so the brokerage rate is .75%
Assume
we change the Override Rate to 12.25%
When
we 
the following error will display:
As
we are paying the client a higher interest rate, we need to decrease the
brokerage rate so their combined total is no more than the original interest
rate of 12.00% plus the brokerage rate of .75%.
In
order to do this it is probable a new Commission Matrix will need to be added
so an appropriate brokerage rate can be used.
Initially, there may be a number of these that will have to be
established but after a while, most combinations will be covered. It is important the new Matrix is labelled
for easy future identification.
To
get rid of the message 
Go
to the Commission Matrix field on the deposit account, [F6] to delete the
matrix that is there. [F2] to display
the following screen:
Enter the new details so that the brokerage rates reflect the decrease by 0.25
The deposit screen will now look like:
Once
the interest rate/brokerage commission rules have been met, the amount of
brokerage will show in the Brokerage field.
Note:
If the Commission Matrix field is left blank on the Deposit Account,
the system will use the Commission Matrix selected at the time the Payout
Brokerage menu item is run.
This
is not a mandatory field.
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