Macquarie calls time on grandfathered commissions

Macquarie has announced it will follow BT and terminate trailing commissions in its wealth operations from next April.

The Macquarie Group logo displayed on a signpost at the Macquarie Building in Sydney. Picture: Bloomberg

Macquarie Bank has announced it will terminate the controversial business of ‘grandfathered product commissions’ in its wealth operations — the decision follows a similar move by fund manager BT last month.

Banks are expecting grandfathered commissions could ultimately be outlawed by the Royal Commission into banking.

‘Grandfathering’ is the practice of continuing or running down a former line of business activity after laws in the area have changed. In wealth management trailing commissions are the most notorious branch of grandfathering.

Though financial advice reforms introduced in 2014 were meant to end commissions in financial advice, trailing commissions were allowed to continue under grandfathering arrangements.

Under trailing commission arrangements customers may pay an ongoing fee to advisers for years after financial advice has been given.

There are almost half a million accounts still affected by grandfathering accounts across the Australian market. Macquarie says its move will benefit about 17,000 clients at the bank.

The changes will commence in April next year.

According to Macquarie, “The decision to discontinue grandfathered product commissions is part of our continued business transformation and in order to further increase transparency and demonstrate value to our clients. For independent financial advisers currently receiving grandfathered payments through our wealth third party channels, this has no impact on those arrangements which will continue.”

Macquarie says the move is part of a wider commitment to building a “market leading comprehensive tailored wealth offering for the high net worth client segment.”

A statement from the bank said, “This change will relate to all advisers within Macquarie Private Wealth that currently receive product commission payments. For independent financial advisers currently receiving grandfathered payments through our wealth third party channels, this has no impact on those arrangements which will continue.”