Some advisers have over a decade of trail built up with the lender
Westpac NZ has been in conversation with aggregators and broker groups about potentially scrapping trail commission for mortgage advisers.
The bank has told broker groups that it wants to remove trail and instead raise upfront commissions. Westpac NZ told Australian magazine The Adviser that it was speaking to its adviser network about “some commercial aspects of our relationship” and is “currently considering a range of feedback”. No decisions have been made yet.
It currently pays 0.60% upfront commission to its New Zealand advisers, and 0.20% trail commission.
Clawbacks will stay for upfront commissions, which are likely to be raised, but trail will be scrapped. This includes trail that has not yet commenced from 2024 settlements.
The Adviser noted that Westpac NZ is potentially planning to offer a one-off payout for trail, believed to be around 2x book value, if the plans go ahead.
There is some precedent for this, as other New Zealand banks have already removed trail commissions from home loans. ANZ, ASB and TSB all pay 0.85% upfront commission.
Advisers urge Westpac to communicate
If the plan proceeds, it would significantly impact the books of New Zealand advisers working with Westpac.
Peter White, managing director at FAMNZ, said that some advisers have been supporting Westpac for over a decade. He is urging the bank to honour existing trail commission, and to implement the new rules - whatever they might be - only for future settlements.
“Some advisers have ten years worth of trail built up,” he told NZ Adviser. “That’s going to have a significant impact on anyone’s business. What needs to happen - and may happen, but there’s been no communication out of Westpac at this stage - is grandfathering all existing loans and arrangements, and having the new rules apply from a certain date.
“What Westpac wants to do commercially is up to them, but it’s about what is fair, reasonable and will continue to give advisers support versus shooting them down, if you like.”
White noted that consumers will also be impacted if advisers decide not to place loans with Westpac, or if they get stuck with the bank due to cash back terms.
On the potential for a one-off payout, White says this may not mean much to some advisers.
“It really depends on how big your book is. If it’s just been established, it’s not of much value to you,” he said. “I think that’s a bit of a cop-out, and they really need to be looking after existing arrangements and leaving them in place.”
White says he has already had calls from concerned advisers, and the key issue is simply the lack of communication from Westpac.
The news emerged in what looks like a leak, and now, White says that Westpac should get ahead by communicating with advisers swiftly and being fully transparent.
“Advisers are concerned, largely because the communication is not there,” he said.
“All of these conversations are speculative because there’s nothing to refer to in writing. You wind up with different stories in different areas wondering where it’s going to land, and the best way to deal with it is just to be open and transparent.”
