Commissions have been a hot topic in Australia this month after the Australian regulator, ASIC, put out a report critical of life insurance advice.

It reviewed adviser files and found many were problematic. It said advice was particularly poor where there were high upfront commissions and that advisers seeking commission might be seen to be prioritising their own desire to earn income over their clients’ needs.

The country’s FOFA reforms had previously moved to ban commissions and conflicted remuneration for financial advisers. But that has since been amended to exclude personal advice on general insurance products from brokers and banking staff.

New Zealand’s Financial Advisers Act is due to be reviewed next year and the issue of commission is believed to be on the agenda.

Jeremy Muir, of Minter Ellison Rudd Watts, said it was likely that it would be discussed but he said it should not be assumed that a ban was imminent.

“We have not come across any appetite either from industry participants or regulators to follow Australia's path in terms of banning commissions.  It's notable that the Australian position is not settled and has been travelling backwards from what was originally enacted.”

Bradley Kidd, of Chapman Tripp, said it was a tricky issue. He said one end of the spectrum of solutions available to regulators was a complete ban on commission on certain types of products.

But he said that would have consequences and could drive a segment of the adviser market out of business. “Less advice would be provided. But if you look at the spectrum of options, that’s one.”

He said the review would have to tread carefully and balance advisers in one camp and consumer protection groups in another.

Kidd said it was an opportunity for the industry to get involved in refining the legislation.  “It’s an opportunity to air things and get a debate going.”