Australia’s biggest investment bank, Macquarie Group, is banning so-called “grandfathered” sales commissions for financial advisers.
Macquarie said about 17,000 customers of its private wealth and private bank would benefit from the decision to axe the commissions from April 1, 2019.
A recent report from the Productivity Commission found members may be still paying more than A$200 million in trailing commissions a year.
In ending commissions for staff who sell the investment bank’s own wealth products to customers, Macquarie joins the country’s No. 2 and No. 3 banks, Westpac Banking Corp and ANZ Banking Group, which have said they would stop the practice.
Australia’s financial watchdog has heard concerns that private wealth advisers are selling products without disclosing they are receiving commissions for the sales, prompting analysts to speculate on so-called “conflicted” advice .
Laws introduced in July 2013 let banks reward their financial advisers with commissions for recommending their own investment and insurance products, provided the clients hired the adviser before that date.
However, advisers were still receiving up to 70% of their remuneration via conflicted commissions rather than straight fees-for-advice, as was originally intended.
The problem was amplified by admissions many customers were paying for advice they never received.
“This is an important step to provide our clients with a transparent product and service offering in line with changing stakeholder and client expectations and our commitment to industry best practice,” Macquarie said in a statement.
ANZ, which has been retreating from wealth management, announced it would stop conflicted commissions in May, while last month, Westpac said it would stop paying commissions to advisers in its BT Financial Group looking after more than 140,000 customers.