NAB Wealth to end trailing commissions on super and investment products

NAB Wealth will follow the lead of rivals and scrap grandfathered commissions on its super and investment products.

NAB CEO Andrew Thorburn. Aaron Francis/The Australian

NAB Wealth will follow the lead of rival BT Financial Advice and scrap grandfathered commissions on its superannuation and investment products.

The initiative, unveiled by National Australia Bank chief executive Andrew Thorburn in a message to staff, will take effect from January 1 next year, with 32,000 superannuation and investment customers to benefit from fee rebates and reductions worth $11 million.

On NAB Wealth chief executive Geoff Lloyd’s first day in his new role, Mr Thorburn said the business environment for wealth industry was “clearly challenging”.

“The royal commission is highlighting where we need to be better for customers,” he said in an email, obtained by The Australian. “There is no doubt that there have been instances where we have let our customers and members down.

“We took too long to fix issues, remediate customers and set things right for those affected.”

The introduction of the Future of Financial Advice reforms in 2013 included a prospective ban on conflicted remuneration.

However, arrangements that were already in place were grandfathered, enabling the payment of some commissions to continue.

BT announced in June it would remove grandfathered payments attributable to its products, which would have represented $14m in cash earnings in the first half of the 2018 financial year. Macquarie announced a similar move the following month.

Mr Thorburn said NAB Financial Planning and NAB Direct Advice would no longer accept grandfathered commissions, and, like BT, would work with external product advisers to do the same.

“We support a complete move away from grandfathered commissions at an industry level, but will honour obligations to aligned advisers and independent advisers under FoFA legislation,” he said.

NAB has announced its intention to separate NAB Wealth by the end of next year.

Like other banks, NAB has been plagued by misconduct in its wealth division, despite wealth accounting for well under 10 per cent of group earnings.

Mr Thorburn has repeatedly apologised and promised the bank would do better in future.

He also announced in the staff email a new centre for customer remediation, which will report to group counsel Sharon Cook.

A proposal to establish the unit was considered by the group board and the risk committee several months ago, before the issues that emerged in the royal commission.