David Naulls
When Australians act they don’t do things by half. The Australian government has announced that by July 2012 financial advisers will be banned from receiving commissions on financial products they recommend to consumers.
The Australian investment industry was enthusiastic about the move. The chief executive of the association of superannuation funds described the changes as "fantastic … they’ve separated product sale and advice. That can only be a good thing".
Predictably the Australian financial-adviser industry wasn't so convinced. Their spokesperson was quoted as saying "there was a hint of the nanny state coming in". This was hardly the most ringing call to the barricades – perhaps financial advisers over the Tasman had accepted that the banning of commissions was just around the corner.
Not so here. As we reported last month, the government had made it clear that an end to commission-based selling was not being considered.
We were stunned that commission selling was going to be allowed to continue, as we think getting rid of it is one of the best ways to raise the competency of financial advisers and make the industry more transparent. Paying advisers by fees, hourly rates or on performance means they are judged solely on the quality of their advice.
So the recent announcement by New Zealand’s Investment Savings and Insurance Association that it’s planning to voluntarily discontinue paying commission on investment products (including KiwiSaver) is a welcome surprise. Its members include some of the biggest wealth-management companies on both sides of the Tasman – including AMP, AXA, and ING New Zealand.
AMP had already signalled that it was abolishing commissions. It appears that the big players have decided that enough damage has been done to the investment industry by poor and non-independent financial advice. If governments weren’t going to act, then the industry would.
We think it’s time our government faced the inevitable and banned commissions. Both countries need to be following the same set of rules.
David Naulls
Editor
Consumer magazine
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