NZ financial institutions plan to voluntarily phase out commissions on investment products, including volume-based performance bonuses or commissions and ongoing renewal commissions.

The new regime, a pre-emptive strike against government regulation, was announced yesterday by the Investment Savings and Insurance Association  (ISI), which represents investment and life insurance companies.

CEO Vance Arkinstall says the proposal follows the “sensible and logical move” by the Australian Government to ban commissions and volume-based payments in relation to investment products.

“ISI is finalising an announcement that will result in a voluntary policy to discontinue the payment of commissions on investment products,” he said.

“We see this as a further step by the industry to improve the confidence and trust of investors in our products.”

The planned changes will see consumers negotiate a fee for the service they receive, ensuring they are aware of the cost and how the advice is paid for.

The ISI board is expected to sign off on the new policy next week, but it could take up to 18 months before the changes take full effect.

Like the Australian reforms, the proposed ISI policy will not be retrospective, with members being given time to implement systems changes and amend documentation and other information.