Financial Advice New Zealand has voiced concern over Westpac’s decision to alter its commission structure for mortgage advisers, warning the move could undermine adviser businesses and limit consumer access to financial advice.
While acknowledging that banks have the right to make commercial decisions, the professional body said meaningful dialogue with the advice sector is essential to prevent unintended impacts on competition and client outcomes. The organisation noted that Westpac’s recent engagement with advisers has improved but the outcome remains disappointing.
“The initial approach felt divisive; however, we acknowledge the move toward open engagement with advisers and aggregators and positively responding to raised concerns,” the organisation said. “Financial Advice New Zealand’s CEO Advice Forum played a vital role in advocating for a better deal for advisers, and we commend their efforts.”
Despite this progress, the group criticised Westpac’s choice to force the sale of trail commission books rather than allowing existing commissions to gradually expire. It said the decision, described as financially advantageous to Westpac’s balance sheet, diverges from standard market practice and lacks justification.
Trail commissions, which provide ongoing revenue for advisers supporting clients beyond loan settlement, can account for up to half of some firms’ annual income, the group noted. Removing them could threaten the viability of smaller advice businesses and reduce service access in underserved communities.
“Advisers continue to support clients well beyond the initial mortgage transaction,” the statement said. “As bank branches have closed, advisers have become the primary support channel for these clients.”
Financial Advice New Zealand said the change conflicts with global trends toward ongoing remuneration models that promote long-term client relationships. It also argued that the decision is inconsistent with the practices of Westpac’s Australian parent, where trail commissions remain part of adviser compensation.
Under the Financial Services Legislation Amendment Act, advisers are required to review clients’ full financial positions during events such as refixing, but the loss of trail income may make this unsustainable, the group warned.
The organisation welcomed, however, Westpac’s adoption of the Commerce Commission’s recommendation for a month-by-month pro-rata clawback structure, calling it “a positive step toward fairer consumer treatment.”
Financial Advice New Zealand urged lenders to ensure remuneration models reflect the real work advisers do and reaffirmed its commitment to advocate for sustainable, client-focused advice practices across the sector.
What are your thoughts on the recent changes imposed by Westpac? Share your insights in the comments below.
