BT calls time on grandfathered commissions

BT says in will voluntarily terminate all remaining trailing commission arrangements with 140,000 customers.

BT Financial CEO Brad Cooper. (David Moir/The Australian)

Fund manager BT Financial Grooup has surprised the market announcing it will voluntarily terminate all remaining trailing commission arrangements with 140,000 customers. The group said the announcement would affect customers at Westpac, St George, Bank of Melbourne and Bank SA.

The controversial trailing commissions — where customers pay an ongoing small fee to advisers for years after financial advice has been given — have emerged as a key issue in the banking royal commission.

BT said it is working towards the changes taking effect from October 1 this year — the group said the lengthy notice period was due to 12 different IT platforms being involved.

For financial advisers who will be out of pocket to the tune of $14 million collectively, BT said it will honour its contractual obligations but left the door open for advisers who wished to voluntarily remove the so-called ‘grandfathered’ payments. Rival banks had earlier taken a different stance in the royal commission, warning of their legal rights to continue with grandfathered trailing commissions.

Brad Cooper CEO of BT explained “Our announcement today builds on prior decisions to stop BT Financial Advisers receiving any benefit from stamping fees (despite being permitted under FoFA), ensuring that all BT Financial Advice ongoing advice customers receive an opt-in notice (not just those who joined after the FoFA reforms commenced as required by FoFA) and giving customers the opportunity to openly provide and review feedback through BT Adviser View.”

BT also offered a glimpse of the value of trailing commissions suggesting, “The financial impact of these changes would have represented $14m of first-half 2018 cash earnings.”