The National Australia Bank (NAB) announced on Monday that it would stop taking grandfathered commissions from its wealth product providers and has urged the rest of the financial services industry to follow suit.
In the wake of revelations at the financial services royal commission, the Australian Securities and Investments Commission (ASIC) called for an end to grandfathered commissions, saying that they encouraged advisers to keep clients in legacy products instead of moving them onto better products.
Freedom of Financial Advice (FOFA) legislation introduced five years ago banned conflicted remuneration for financial products. ‘Grandfathering’ refers to the old laws that applied before this time that continue on contracts that were entered into before the new laws came into effect.
According to a statement from the NAB, around 32,000 superannuation and investment customers will benefit through approximately $11 million in fee rebates and reductions, which will take effect from 1 January 2019.
NAB Financial Planning and NAB Direct Advice will also work with external product providers to have grandfathered commissions that are currently being paid utilised for the benefit of members.
“We need to continue to focus on customers and keep finding ways to improve, to lift and to rebuild trust,” NAB Group CEO Andrew Thorburn said.
“To do this, we must continue our important work to transform the bank to be simpler, faster – and better.”
Mr Thorburn said that the NAB supported a complete move away from grandfathered commissions right across the industry.
Westpac made the move in June to remove grandfathered payments attributable to its BT advice products.
Should the rest of the financial services sector follow Westpac and NAB’s lead and stop accepting grandfathered commissions?