http://www.businesstimes.com.sg/arch...jects-20140923

Published September 23, 2014

HSR dropped from marketing 2 EC projects

Its new 100% commission scheme for sales agents may have ruffled feathers of alliance partners

By Lynette Khoo

[email protected] @LynetteKhooBT


HSR International Realtors' new commission scheme appears to have ruffled the feathers of its alliance partners even before the scheme takes effect in January.

The firm is kept out from marketing the two upcoming executive condominium projects under the Project Alliance Group (PAG), of which it is a part, for now.

In recent advertisements promoting Belleswood and Belleswater, HSR was excluded from the list of marketing agents, even though the PAG logo was present. The projects are being developed by China-based Qingjian Realty and were first clinched by SLP International and shared with the alliance.

When contacted, the other members of PAG - namely DWG, OrangeTee and SLP International - maintained that the alliance of the four agencies remains intact.

HSR chief executive Anne Tong told BT that some details need to be ironed out internally after HSR's 100 per cent scheme was announced, so it "is best not to participate at this moment in the two new launches".

This was a decision that was mutually agreed to with the other PAG members, she said, adding that the scheme is not something the industry is receptive to, with agencies "concerned that their agents will swing over".

But Ms Tong maintained that the new scheme is here to stay. "It's a bold step to break the norm and to be different from everyone else," she added.

Ms Tong revealed that some agents have applied to transfer to HSR since the announcement, which she believes will reverse the 21.6 per cent year-on-year contraction in its agent strength, which now stands at 1,327 agents.

Mohammed Ismail, chief executive of PropNex, one of the largest agencies here with over 5,600 agents, noted that there needs to be common underlying principles for agencies to stay together in an alliance.

"With one agency having a more favourable commission structure, the showflat will become a poaching ground to recruit salespersons from other agencies within an alliance, which will not be healthy", he said.

Salespeople from the non-participating agencies may also prefer to co-broke with HSR to earn higher commissions.

The typical commission payout in the industry ranges from 70 to 90 per cent, depending on the experience and performance of the salesperson.

A truly 100 per cent commission scheme, under which agents take home the full commission but pay a monthly fee to the firm and are charged separately for ancillary services, has a negative connotation in the industry because a few small agencies that implemented the scheme have all closed shop.

But HSR's new commission scheme is different in that new salespeople need to rake in more than S$88,000 of gross commissions before taking home 100 per cent of the commission above this threshold. Experienced salespeople who currently get 90 per cent of commissions will only be entitled to 100 per cent of what they earn above S$38,000 in a 12-month cycle.

This means that the 54 team managers and leaders at HSR will still get their "over-riding" fees for the commissions earned by their sales agents before they hit the mark for the 100 per cent scheme.

Still, rival firms note that "over-riding" fees are capped under this scheme. Team managers and leaders would then have less incentive to recruit and train agents, which could hurt the firm in the long run.

It all boils down to having a strong pipeline of projects to be sustainable, said UPG International key executive officer (KEO) Ujeen Tan. "It is better to have 90 per cent of something than 100 per cent of nothing."

He noted that team leaders will have to spend more time closing their own deals to make up for that haircut.

He also cautioned that retaining team leaders is crucial - when one leaves, he often takes along with him the entire team of agents.

Mr Tan himself was a co-founder of the now third-largest realty Huttons, before branching out with a few friends to set up Black Diamond Real Estate Group, and then starting UPG on his own.

Ku Swee Yong, chief executive of Century 21 Singapore and the KEO of International Property Advisor, noted that under HSR's 100 per cent scheme, the commissions that go to the agency are also capped. This disregards the fact that with more transactions clocked by a sales agent, there will be higher administrative costs, paperwork, compliance costs and potential legal liabilities.

Ms Tong, however, said the new scheme was implemented after consultation with HSR's core team leaders, who supported the scheme.

Donald Yeo, head of marketing and training at HSR, told BT that there is no let up in the support services and training provided to sales agents.

According to him, the top 100 salespeople at HSR earned S$100,000 and above last year. His ballpark estimates, based on sales transactions from January and August this year, suggest that the top 20 per cent of salespeople in the industry are earning an annualised S$50,000 while the other 80 per cent are taking in an annualised income of S$3,000.

Last year, HSR was acquired by Phileo Capital, the investment vehicle of Malaysian tycoon Tong Kooi Ong, who is chairman and CEO of Singapore-listed UPP Holdings and controls The Edge Media Group.

According to Ms Tong, who took over as CEO last year, the parent firm has pumped significant investments into HSR to revamp its IT and accounting systems and beefed up its research, legal, marketing and training services for its agents in the past year.