Westpac scraps trail commissions on mortgages
Westpac is axing trail commissions on home loans from June next year.
Thursday, October 16th 2025, 8:59AM 
3 Comments
Key Points
- Westpac axes trail commissions
- Increases upfront commissions to 90 basis points
- Financial Advice NZ criticises move
- Westpac refuses interview on changes
From 1 June advisers will receive a commission of 0.90% on the value of new loans. This will replace the existing 0.60% commission and trail of 0.20%.
The upfront commission only payment will apply to new loans settlements from June 1.
Before June, a 0.30% top-up payment will apply to new loans settled up until 31 May, bringing total upfront commission to 0.90% during the transition period.
Westpac says, in an email to TMMOnline; "The new structure is designed to provide highly competitive pricing, align with evolving industry standards, drive better outcomes for customers, and ensure we’re well positioned to support advisers into the future."
It fails to mention that is it also buying back trail books from advisers.
The spokesman also says, "We appreciate these changes may be unsettling for some advisers. We’re committed to supporting them through this transition and making sure they have the tools they need to continue delivering great outcomes for customers."
As part of this change we’ll also put more resources into improving turnaround times and investing in digital enhancements, to help provide a market leading experience for advisers and their customers.
Disappointment in forced sale
Financial Advice New Zealand (FANZ) while it respects commercial decisions made by financial institutions, Westpac’s recent engagement with the profession initially approach felt divisive, but it did improve once the CEO Advice Forum advocated for a better deal for mortgage advisers.
FANZ chief executive Nick Hakes says it is disappointed by Westpac’s decision to force the sale of trail commission books rather than grandfathering existing trail income.
This approach is inconsistent with market practice, where trail commissions are typically allowed to run off over time.
“Westpac had a choice, and it opted for a model that is more financially beneficial to its balance sheet, reducing liabilities and improving its financial position.
“Citing the Commerce Commission’s focus on pricing competition as a reason for this, lacks merit,” he says
Impact on financial advice businesses
Advisers continue to support clients well beyond the initial mortgage transaction.
Many advisers maintain support teams and provide ongoing advice to clients, especially those who cannot or do not wish to switch lenders.
Hakes says as bank branches have closed, advisers have become the primary support channel for these clients.
“Advisers must now rethink their business models, potentially broadening the scope of advice or offering clients a choice between ongoing support with trail-paying lenders or limited support for two years post-refinance.”
He says trail commissions have long been an important ongoing revenue stream for financial advice businesses who maintain long-term relationships with their clients.
“These relationships don’t end at loan settlement—advisers continue to provide ongoing support, guidance, and advice services throughout the life of the loan.”
Feedback FANZ has received suggests that trail income can represent 25–50% of annual revenue for some firms, helping sustain their ability to deliver ongoing service for clients.
The removal of this income threatens the viability of small and medium-sized advice businesses, many of which have built their value propositions around continuous client care.
Importantly, the client needs do not disappear, they still require advice, especially during key financial events like refixing or restructuring, Hakes says.
This decision risks reducing access to quality financial advice, particularly in underserved communities, by destabilising the adviser ecosystem that supports them.
Misalignment and impact on consumers
Globally, the financial advice profession is shifting away from upfront commissions and toward ongoing remuneration models that support long-term client engagement and fiduciary standards.
Advice business models are now reflective of a broader move toward transparency, sustainability, and client-centric advice.
Hakes says Westpac’s removal of trail commissions runs counter to these global trends and in particular Australian banks, potentially discouraging the evolution of advice practices, and is at odds with their Australian-owned parent.
Regulatory and market implications
Under the FSLAA regime, advisers are required to review clients’ full financial positions during events like refixing.
“Without trail income, it becomes harder to sustainably support these regulatory obligations.
“Westpac’s move to digital refixing via apps, while efficient, risks reducing competition and limiting consumer choice, as financial advisers are best placed to offer impartial financial advice.”
He says FANZ does, however, welcome Westpac’s adoption of recommendation 10 of the Commerce Commission’s banking competition market study by moving to a month-by-month pro-rata clawback structure. “This is a positive step toward fairer consumer treatment.”
Further action
Hakes says while FANZ appreciates Westpac’s willingness to listen to feedback, it is disappointing that a significant bank lender will no longer recognise the ongoing time and cost required of advisers to service customers beyond the initial advice.
Financial Advice New Zealand urges all lenders to recognise the value of ongoing advice and ensure remuneration models reflect the real work advisers do.
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Comments from our readers
Despite the fact that mortgage advisers are individually accredited with each lender (some having been so now for over 20 years) the negotiation of our commission structure remains in the hands of “third parties” called head groups. Advisers with long memories will recall that when Westpac announced in 2014 that they would start paying trail Westpac choosing to pay it in arrears was a major controversary. All banks (including Westpac in Australia) have always paid trail at settlement and the fact that head groups at the time did not push back on this has now seen many mortgage advisers disadvantaged financially.
Westpac’s announcement shows again how irrelevant head groups (aggregators) are when it comes to the bulk of the mortgage adviser industry and our relationship with the banks. The supposed “strength in numbers” concept of mortgage advisers belonging to an aggregator has been exposed as having no value to adviser businesses. This industry holds a lot of power with the banks given that advisers now collectively write 50%+ of all new home loan business but because of the ineffectiveness of head groups who have their own businesses and agendas we don’t ever get to weld it.
That mortgage advisers with their own FAP licences are still being forced to belong to an aggregator to simply access the banks for our clients is now in desperate need of reviewing. Gone are the days of aggregators been the single source of PI insurance and anybody can now purchase a fit for purpose CRM right off the internet which is ISO security compliant and has the added benefit of not being controlled by the aggregator themselves. From a “risk” perspective there is also statically far less likelihood of a complaint happening for a 1–10-person mortgage advisory business holding its own FAP licence than this business been an authorised body among many others working under an aggregator’s licence.
The current status quo of head groups having a stranglehold over mortgage advisers’ access to banks and lenders must change. Insurance advisers with their own FAP licence already have direct relationships with the various life insurers and the same must happen now also for the mortgage advice industry. The aggregator model remains relevant to those mortgage advisers who have chosen to work under a head group’s FAP licence but mortgage advisers providing advice under their own FAP licence need to be having direct relationships with the banks themselves. Westpac’s announcement yesterday may in fact be the catalyst for this change to occur across the industry especially for some of the larger mortgage advice businesses who rely on trail to pay staff etc.
P.S. This is the first article I have seen Financial Advice NZ speak about anything to with the mortgage adviser industry in a long time. FANZ have been deafeningly quiet.
Amused, I wonder if comCom might have something to say about this. The way Westpac have structured the pathetic 'buy back' of Trail commissions means that an Adviser who supports them in the coming months gets 'rewarded' whilst an Adviser who shuns them will get diddly squat.
Poor show Westpac, need to do better then this contempt for your largest distribution channel.
Don't get me started on the 'trail' being paid to Dosh customers.
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