Australia’s NAB scraps grandfathered commissions
National Australia Bank (NAB) is following in the footsteps of other major Australian banks and has announced that NAB Financial Planning (FP) and NAB Direct Advice will no longer accept grandfathered commissions from NAB Wealth superannuation and investment product providers.
The bank said that around 32,000 superannuation and investment customers will benefit through fee rebates and reductions, totalling approximately A$11m, with effect from 1 January 2019.
During the recent superannuation round of the Royal Commission, the major bank was questioned about some of the poor disclosure around its advice fees to customers and why it continued to deduct plan service fees from its MasterKey Personal Super (MKPS) member accounts, when many of them had no link to an adviser.
NAB was also asked to explain to why it did not provide full remediation costs to ASIC in writing when it was already aware of the number clients affected by fees for no service and the total compensation amount.
“We need to continue to focus on customers and keep finding ways to improve, to lift and to rebuild trust,” NAB group chief executive Andrew Thorburn said in a statement.
“To do this we must continue our important work to transform the bank to be simpler, faster – and better.”
NAB said it supports a complete move away from grandfathered commissions at an industry level – but will continue to honour obligations to aligned advisers and independent financial advisers under FOFA legislation.
“This is a complex issue for the industry, and NAB believes the right framework needs to be in place to appropriately transition off grandfathered commissions,” the bank said.
“We look forward to working with the wider industry and regulators to ensure this is done in a considered way in line with community and customer expectations.”
The major bank follows its peers Westpac and Macquarie that have also backed away from grandfathered commissions for salaried advisers.
ASIC called for a ban, saying: “Grandfathered commissions operate to incentivise advisers to keep clients in legacy products with a continuing commission structure, even where there may be better products available to meet the client’s needs.”
The FOFA (Future of Financial Advice) legislation banned commissions within investment and superannuation arrangements entered into after 1 July 2013, although existing arrangements were retained or ‘grandfathered’.