Key Points
- Westpac axes trail commissions
- Increases upfront commissions to 90 basis points
- Financial Advice NZ criticises move
- Westpac refuses interview on changes
From 1 June advisers will receive a commission of 0.90% on the value of new loans. This will replace the existing 0.60% commission and trail of 0.20%.
The upfront commission only payment will apply to new loans settlements from June 1.
Before June, a 0.30% top-up payment will apply to new loans settled up until 31 May, bringing total upfront commission to 0.90% during the transition period.
Westpac says, in an email to TMMOnline; "The new structure is designed to provide highly competitive pricing, align with evolving industry standards, drive better outcomes for customers, and ensure we’re well positioned to support advisers into the future."
It fails to mention that is it also buying back trail books from advisers.
The spokesman also says, "We appreciate these changes may be unsettling for some advisers. We’re committed to supporting them through this transition and making sure they have the tools they need to continue delivering great outcomes for customers."
As part of this change we’ll also put more resources into improving turnaround times and investing in digital enhancements, to help provide a market leading experience for advisers and their customers.
Disappointment in forced sale
Financial Advice New Zealand (FANZ) while it respects commercial decisions made by financial institutions, Westpac’s recent engagement with the profession initially approach felt divisive, but it did improve once the CEO Advice Forum advocated for a better deal for mortgage advisers.
FANZ chief executive Nick Hakes says it is disappointed by Westpac’s decision to force the sale of trail commission books rather than grandfathering existing trail income.
This approach is inconsistent with market practice, where trail commissions are typically allowed to run off over time.
“Westpac had a choice, and it opted for a model that is more financially beneficial to its balance sheet, reducing liabilities and improving its financial position.
“Citing the Commerce Commission’s focus on pricing competition as a reason for this, lacks merit,” he says
Impact on financial advice businesses
Advisers continue to support clients well beyond the initial mortgage transaction.
Many advisers maintain support teams and provide ongoing advice to clients, especially those who cannot or do not wish to switch lenders.
Hakes says as bank branches have closed, advisers have become the primary support channel for these clients.
“Advisers must now rethink their business models, potentially broadening the scope of advice or offering clients a choice between ongoing support with trail-paying lenders or limited support for two years post-refinance.”
He says trail commissions have long been an important ongoing revenue stream for financial advice businesses who maintain long-term relationships with their clients.
“These relationships don’t end at loan settlement—advisers continue to provide ongoing support, guidance, and advice services throughout the life of the loan.”
Feedback FANZ has received suggests that trail income can represent 25–50% of annual revenue for some firms, helping sustain their ability to deliver ongoing service for clients.
The removal of this income threatens the viability of small and medium-sized advice businesses, many of which have built their value propositions around continuous client care.
Importantly, the client needs do not disappear, they still require advice, especially during key financial events like refixing or restructuring, Hakes says.
This decision risks reducing access to quality financial advice, particularly in underserved communities, by destabilising the adviser ecosystem that supports them.
Misalignment and impact on consumers
Globally, the financial advice profession is shifting away from upfront commissions and toward ongoing remuneration models that support long-term client engagement and fiduciary standards.
Advice business models are now reflective of a broader move toward transparency, sustainability, and client-centric advice.
Hakes says Westpac’s removal of trail commissions runs counter to these global trends and in particular Australian banks, potentially discouraging the evolution of advice practices, and is at odds with their Australian-owned parent.
Regulatory and market implications
Under the FSLAA regime, advisers are required to review clients’ full financial positions during events like refixing.
“Without trail income, it becomes harder to sustainably support these regulatory obligations.
“Westpac’s move to digital refixing via apps, while efficient, risks reducing competition and limiting consumer choice, as financial advisers are best placed to offer impartial financial advice.”
He says FANZ does, however, welcome Westpac’s adoption of recommendation 10 of the Commerce Commission’s banking competition market study by moving to a month-by-month pro-rata clawback structure. “This is a positive step toward fairer consumer treatment.”
Further action
Hakes says while FANZ appreciates Westpac’s willingness to listen to feedback, it is disappointing that a significant bank lender will no longer recognise the ongoing time and cost required of advisers to service customers beyond the initial advice.
Financial Advice New Zealand urges all lenders to recognise the value of ongoing advice and ensure remuneration models reflect the real work advisers do.
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