Australian Royal Commission will impact NZ

Sanders, now a Sydney-based Partner covering Governance, Regulation and Conduct at Deloitte, says pressure on trail commission and remuneration from lenders will end up having a knock-on effect in New Zealand, due to the close regulatory relationship between the two countries.

The Royal Commission into financial services has placed the spotlight on the big lenders and highlighted endemic misconduct at the big banking groups. The Commission has also placed scrutiny on the relationship between mortgage advisers and the banks, and whether commission is fair on customers. 

The Commission is expected to recommend a ban on trail commission, but that would not become law unless the Government pushed for additional legislation. The Reserve Bank of New Zealand are conducting their own review of New Zealand's banks, but there are currently no signs of a radical move to ban or change fees and commission for advisers.

Yet Dr Sanders believes New Zealand advisers should watch developments closely: "I expect Hayne to recommend banning commission of any form for financial products. We just don't know yet whether the government will follow such an approach or recognise that there could be a consumer access consequence and potentially constrain or control, rather than ban."

"The banks are not yet committing to a wholesale ban on mortgage broker commission, and are not likely to move because of first mover disadvantage risks. But if the Australian government bans them, it is only a matter of time before there is an effect in New Zealand," Sanders added.

Sanders said New Zealand has historically moved "in the same direction" as New Zealand: "We saw that with the financial advisers regime, with the introduction of education requirements that then flowed through to New Zealand, and professional standards ideas that flowed back in a different way to Australia. Anything that happens here [in Australia] in the banking sector should be scrutinised very carefully by the banking, financial advice and mortgage adviser sector in New Zealand."

Sanders added: ""Things like banning or constraint on commissions, including for the Australian broking community, which seems likely to be a recommendation from the Royal Commission, may well have a precedent effect for New Zealand. Maybe not with the same immediacy, but it is definitely something to watch because there will be a flow-on effect. The detail of what and when will likely be hammered out as a legislative debate in 2019."