Consumer NZ calls for commissions to be banned
Media release: Consumer NZ calls for commissions to be banned after new Australian research
Consumer NZ is calling for New Zealand to follow the examples of Australia and the UK where it seems likely commissions and other types of remuneration that financial product providers pay to advisers' will be banned.
The much-anticipated report from the inquiry into financial products and services by the Australian Parliamentary Joint Committee on Corporations and Financial Services was released on Monday. The Committee, chaired by MP Bernie Ripoll, has recommended that remuneration structures that create a conflict of interest for advisers should be removed. The committee recommends that the government consult with industry in developing the most appropriate way to bring an end to the practice of product providers making payments to financial advisers.
"We're pleased that Australia is taking a strong stance on commissions. Consumers need to know they are getting unbiased advice." Consumer NZ CEO Sue Chetwin said.
Chetwin said that the financial services regulator in the UK has also indicated that commissions and other incentives that create a conflict of interest for financial advisers are unlikely to remain. In a consultation document released in June, the UK's Financial Services Authority (FSA) made clear it is proposing to bring an end to the commission-based system of adviser remuneration. It is proposing to ban product providers from offering amounts of commission to secure sales from adviser firms and, in turn, to ban adviser firms from recommending products that automatically pay commission.
"We hope policymakers in New Zealand take note of the reforms that are taking place in Australia and the UK and introduce similar measures. That means banning commissions and creating an environment where consumers can get unbiased advice."
The findings in the Ripoll report are consistent with the concerns Consumer NZ has raised following its recent mystery shopping of financial advisers.
The Code Committee for Financial Advisers, appointed in July, is developing a code of conduct for financial advisers. It has recently released a public consultation document on minimum standards of ethical behaviour and client care for authorised advisers.
"We're pleased the Code Committee decided to include a discussion on commissions in its new consultation document and we encourage consumers to get their voices heard by making a submission to the committee before December 18." Chetwin said.
A background report on Consumer's mystery shop is available for download.
The full report is available free online.