Westpac looks to can trail commissions
Westpac is proposing to alter the way it remunerates mortgage advisers who originate its mortgages and remove trail commissions.
Friday, October 3rd 2025, 5:19PM 
3 Comments
by Jenny Ruth
While it has been reported from Australia that Westpac will lift its up-front commissions to an unspecified level from the current 0.6% and that it will cease to pay current 0.2% trail commissions, no final decisions have been made.
Asked for comment, Westpac said: “We have strong and long-standing relationships with mortgage advisers and we value the role they play in supporting customers with their home ownership aspirations.
“We’re in discussions with our adviser network about some commercial aspects of our relationship. We are currently considering a range of feedback and no final decisions have been made,” the bank said.
“We can’t comment further while the conversations are ongoing.”
Westpac said in May that mortgage advisers accounted for about 64% of its net new mortgages in the six months ended March and chief executive Catherine McGrath told GoodReturns/TMMonline that advisers “are a really important part of the market.”
Advisers have been gradually increasing their share of Westpac’s mortgage business – at March 31, advisers had originated 55.2% of the bank’s total mortgage book.
At NZ’s largest bank, ANZ Bank New Zealand, if the institutional business is excluded, advisers account for more than 80% of mortgage origination.
The Reserve Bank’s financial strength dashboard showed Westpac had lost market share in the year ended June because it accounted for 13.4% of net new lending on mortgages by registered banks, reducing its market share to 18.64% - its market share at March 31, 2024 had been 19.02%.
TMMonline understands that the aggregators Westpac has been negotiating with have been given legal letters warning them against discussing the negotiations publicly.
The Finance and Mortgage Advisers Association of NZ (FAMNZ) managing director Peter White acknowledged that there is precedent for scrapping trail commissions.
“We can’t interfere with Westpac’s commercial arrangements but the industry must be given fair notice of any change,” White said.
“Westpac needs t be very clear as to what is happening as there is too much speculation in the market place at the moment,” he said, adding that advisers have built up trail incomes over 10 years through supporting Westpac.
White added that past trail commissions need to be protected.
Trail commissions have been a contentious issue in the industry for decades with ANZ and ASB currently not paying trail, but Westpac, BNZ and
Kiwibank all paying it and a number of non-bank mortgage lenders, including Sovereign, Bluestone and Liberty Financial, also paying trail commissions.
In theory, trail commissions are aimed at encouraging brokers to keep providing service to their clients after the initial placement of a mortgage and are a measure designed to discourage churn.
Such commissions also tend to increase the value of a mortgage adviser’s business with sales prices of such businesses often reflecting a multiple of trail.
Currently, up-front commissions range between 0.5% and 0.85% while trail commissions typically range anywhere from 0.05% to 0.2%.
In the 2000s, all four of the major NZ banks were not paying advisers trail commissions while BNZ ceased dealing with advisers at all.
Then in 2014, Westpac broke ranks to reintroduce trail commissions, saying explicitly that it wanted to increase its share of adviser business and that it wanted to build sustainable relationships with advisers.
A Westpac official said at the time that the bank had been seen as “a fair-weather friend” by advisers and it had wanted to change that perception.
Although all four of NZ’s major banks are owned by Australia’s big four banks, trail commissions aren’t common in Australia – Australia’s Productivity Commission had recommended in 2018 that the industry eliminate trail commissions, arguing that they provided advisers with “perverse incentives” to keep clients locked into their loans, reducing competition.
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Comments from our readers
If you place customers for the right reasons, they are statically more likely to retain the adviser relationship, any adviser putting deals to a bank just to get trial should leave the industry.
With a much greater emphasis being placed now on competition in the banking sector “retention incentives” like trail commission paid by banks to mortgage advisers look potentially to be about to go the way of the dodo. The regulators stance is that advisers are expected to ensure that a client’s lender is the best option for them for the duration of their home loan. This means a change in mindset for some advisers who have been content on keeping their clients at certain banks so that they receive a trail payment.
At present been a lender that pays advisers trail commission Westpac has the worst extra repayment policy of any main bank in the country, and over the past 12-18 months (by its own admission) has not sought in many instances to compete with competitor banks on pricing. Especially for its existing customers. It would be hard then for a mortgage adviser to justify to the FMA why they have kept their client at Westpac when superior lender options were available in the market. An adviser would have to be able to demonstrate that no other lender would have assisted their client.
If some advisers expected trail commission to be a guaranteed certainty in this new regulatory environment, then unfortunately they had their heads in the sand. Unlike the insurance industry where a client’s health and pre-existing conditions can preclude them from changing providers when it comes to a home loan barring any financial impediment clients can now literally switch banks every couple of years to get the best deal possible. Mortgage advisers are ideally qualified to assist clients seeking to do just that.
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