Pricing changes hit NAB planners

FINANCIAL planners at National Australia Bank have been warned to brace for big cuts to their commissions-based income, as a slowing market, higher consumer expectations and new regulations trigger changes to companies' pricing structures, according to an internal document.

By InvestSMART · 14 Nov 2012

By InvestSMART ·
14 Nov 2012

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The adjustment, to begin in December, is likely to send shock waves through the ranks of senior financial planners who for years have enjoyed a steady income thanks in part to percentages earned on previous sales - with the clients often unaware of the ongoing costs.

"Whether it's right or wrong to have been sitting on these books, to suddenly have your revenue cut in some cases by 50 per cent, it doesn't allow you to continue to live the life you've been budgeting for," said one financial planner.

The change will end the practice of continuing commissions generated by past sales of products, which in some cases are passed from one planner to the next on retirement. That revenue has helped financial planners achieve monthly sales goals by NAB financial planners, keeping their incomes high.

"Since the global financial crisis in 2007, markets have been and remain subdued," said a NAB employee briefing on the proposed changes obtained by BusinessDay. "The growth experienced in the preceding decade is unlikely to return. Subdued revenue puts immense pressure on our cost base."

The briefing also hinted that customer inertia could no longer be counted on to ensure revenue.

"Increasingly, more customers are demanding value be delivered and where actual value is not deemed to be sufficient, customers are moving relationships, accounts and holdings to other providers where the value exchange is deemed more equitable," the document said.

Under the proposed changes, clients will receive "scaled" services, with high-needs clients getting direct advice with phone advice for customers who need less advice. The changes will also bring NAB into line with planned Future of Financial Advice reforms.

The NAB planner, who asked not to be named, said the changes would prevent clients potentially paying hundreds of dollars a year in fees to get "bugger all" service. At the same time, he said, senior financial planners would no longer receive revenue that added to the bonus targets, just for "getting out of bed".

MLC advice and marketing executive general manager Richard Nunn, who speaks for NAB's financial planners, said the changes put the company at the forefront of the industry's evolution. "NAB Wealth has led the industry in championing for increased transparency within advice relationships," he said.

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Frequently Asked Questions about this Article…

What pricing changes is NAB making to its financial planner services?

NAB is changing its pricing structure to end the practice of ongoing commissions generated by past product sales and to introduce 'scaled' services—direct advice for high‑needs clients and phone advice for lower‑needs clients. The changes are intended to align NAB with planned Future of Financial Advice reforms and are set to begin in December, according to an internal document.

When will the NAB commission and pricing changes start affecting financial planners and clients?

The internal briefing obtained by BusinessDay says the pricing and commission changes are due to begin in December. The document signals those timing details for the rollout to planners and clients.

How will ending ongoing commissions affect NAB financial planners' incomes?

According to planners quoted in the internal document, the removal of ongoing commissions could cut some advisers' revenue significantly—one planner warned cuts could be as much as 50% in some cases—reducing income that previously helped meet monthly sales goals and bonus targets.

Will NAB clients pay less under the new pricing and commission model?

The article suggests the changes could prevent some clients from paying 'hundreds of dollars a year' for limited service: clients with lower needs may be shifted to phone advice rather than paying for full adviser service. NAB says the changes increase transparency and better match service levels to fees.

Why is NAB changing adviser pricing now?

NAB cites a mix of factors in an internal briefing: subdued markets since the 2007 global financial crisis, pressure on revenue and cost bases, higher consumer expectations for value, and upcoming regulatory reforms. The document also noted customer inertia can no longer be relied on to maintain revenue.

What does 'scaled' services mean in NAB's new model?

Under the proposed approach, 'scaled' services mean clients with high advice needs will receive direct, face‑to‑face advice, while customers with lower needs will be offered phone advice. The aim is to better match service level and cost to client needs.

How will the changes affect legacy trailing commissions and adviser handovers on retirement?

The proposed changes will end the practice of continuing commissions generated by past product sales—including commissions that in some cases were passed from one planner to the next on retirement—removing that source of ongoing revenue for planners.

What is NAB saying about transparency and the future of financial advice?

Richard Nunn, MLC advice and marketing executive general manager who speaks for NAB's financial planners, said the changes put NAB at the forefront of the industry's evolution and that NAB Wealth has led the industry in championing increased transparency within advice relationships.