Australia's JBWere cuts adviser commissions

Added 23rd June 2016

Australian financial advisers JBWere, a unit of National Australia Bank (NAB), plans to revamp its remuneration structure and cut adviser commission rates in line with changes in the domestic and global regulatory environment.

Australia's JBWere cuts adviser commissions

JBWere said the move followed a six-month review of its remuneration framework which involved consultations with senior leaders and advisers in the business.

“Under the changes, we will be establishing a new out performance incentive pool to reward advisers and senior leaders across the firm who make a significant contribution to our business.  This will be funded from a percentage of profits,” said JBWere chief executive, Justin Greiner.

Recognition of regulatory change

“In order to align our shareholders’ interests, the firm will be retaining a small portion of revenue from clients referred to JBWere advisers from the NAB network. Adviser commission rates will also be reduced by up to 1.5%,” he said.

JBWere said it was taking a leading industry position in recognising the domestic and global regulatory environment, and the value that is placed on the deferral of incentive based compensation as a mechanism for risk management.

Greiner said: “We believe these changes will cement our strategy, align the business around our strong growth plan, and importantly leverage our partnership ethos, which has been integral to the success of this 175-year-old organisation.”

Advice reforms

This year Australia introduced new laws, known as the Future of Financial Advice (Fofa) reforms, aimed at improving the trust and confidence of Australian retail investors in the financial services sector, and at ensuring the availability, accessibility and affordability of high quality financial advice.

The reforms require financial advisers to ask clients to 'opt-in' every two years if they wish to continue to receive ongoing advice, and ban all trailing and up-front commissions though they allowed existing commission arrangements to remain.

Industry overhaul

JBWere’s move follows a decision by investment bank Morgan Stanley last month to slash advisers’ pay as part of an overhaul of its A$26bn (£13.3bn, $19.7bn) Australian wealth management business.

According to local media reports, under Morgan Stanley’s new pay structure an advisers’ share of the first A$500,000 in revenue they write will fall to 30% from 40%. An adviser writing A$1.5m worth of business from clients is facing a A$70,000 pay cut.

Those bringing in clients with more than A$1.5m to invest will be unaffected and still receive 52%, which Morgan Stanley hopes will motivate advisers. 

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Richard Hubbard

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Richard Hubbard is the group editor at Last Word. He is responsible for the editorial content of International Adviser, Portfolio Adviser, Expert Investor and Fund Selector Asia. Richard previously worked for Thomson Reuters and has covered the financial services industry and investment themes from its offices in London, Singapore, Hong Kong and New York. Richard started his career at the Australian Financial Review in Sydney.


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