SYDNEY (Reuters) - Australia’s biggest investment bank, Macquarie Group Ltd (MQG.AX), said on Tuesday its wealth management advisers will stop taking commissions for selling the company’s products, a practice widely expected to be outlawed following a banking inquiry.
In dispensing with commissions for staff who sell the company’s own wealth products to customers, Macquarie joins the country’s No. 2 and No. 3 banks, Westpac Banking Corp (WBC.AX) and Australia and New Zealand Banking Group Ltd (ANZ.AX), which have said they would stop the practice.
Australia’s financial services industry is experiencing heightened scrutiny as a public inquiry called a Royal Commission airs almost daily allegations of questionable conduct from board-level deception of a regulator to predatory lending to vulnerable consumers.
Though Macquarie has not faced questioning, the inquiry has heard concerns that private wealth advisers are selling products without disclosing they are receiving commissions for the sales, prompting analysts to speculate so-called “conflicted” advice will be banned as a result.
Macquarie said about 17,000 customers of its private wealth and private bank would benefit from the decision to axe the commissions from April 1, 2019.
“This is an important step to provide our clients with a transparent product and service offering in line with changing stakeholder and client expectations and our commitment to industry best practice,” Macquarie said in a statement.
Laws introduced in July 2013 let banks reward their financial advisers with commissions for recommending their own investment and insurance products, provided the clients hired the adviser before that date.
But the Royal Commission has revealed banks have relied heavily on the so-called grandfathered provision to charge ongoing fees to clients, thousands of whom have not received the advisory services they paid for.
Last month, Westpac said it would stop paying commissions for conflicted advice for more than 140,000 customers from Oct. 1. In May, ANZ, which has sold most of its advisory network to IOOF (IFL.AX), said it would stop paying bonuses to financial planners for selling its products.
Reporting by Byron Kaye; Editing by Amrutha Gayathri