Royal Commission calls for adviser remuneration overhaul

The recommendations come from Commissioner Kenneth Hayne's long-awaited report, following a lengthy review into misconduct in the banking, superannuation and financial services industries. Banks have been publicly censured for their practices, and advisers have also come under fire.

In the report, Hayne says "The borrower, not the lender, should pay the mortgage broker a fee for acting in connection with home lending." Hayne wants the change introduced over two to three years, during which period banks will be prohibited from paying trail commission and then all other forms of commission to advisers.

Hayne's proposals come after he previously indicated lender commission "might" be a conflict between banks and advisers.

Hayne said in his final report: "Value-based commissions paid by lenders to mortgage brokers are a form of conflicted remuneration. That is, value-based commissions are a form of remuneration that can reasonably be expected to influence the choice of mortgage, the amount to be borrowed, and the terms on which the amount is borrowed. The evidence from CBA showed that the size of commissions has an effect on which lender the broker recommends to the borrower.