The Rudd Government announced that it will legislate to ban conflicted remuneration structures including commissions and volume based payments, in relation to the distribution and advice of retail investment products including managed investments, superannuation and margin loans. The measures will come into force from July, 2012.

Financial Services Minister Chris Bowen says the reforms are designed to tackle conflicts of interest that have threatened the quality of financial advice that has been provided to Australian investors, and the mis‑selling of financial products that culminated in high profile corporate collapses.

"These reforms will see Australian investors receive financial advice that is in their best interests, rather than being directed to products as a result of incentives or commissions offered to the financial adviser."

Institute of Financial Advisers (IFA) president Lyn McMorran says no question about it, the banning of commissions will also happen in New Zealand.

"Advisers would be wise to look at alternative remuneration models for investment advice," she says.

The proposed ISI policy will include the discontinuance of volume-based performance bonuses or commission and ongoing renewal commissions.

ISI chief executive Vance Arkinstall says a paper has been put to the board which will be meeting at the end of next week.

"We're going to give investors the opportunity to negotiate a separate fee for the level of service they receive - hopefully that will engender confidence," he says.

Labour Party commerce spokeswoman Lianne Dalziel says she thinks Australia's move to ban commissions is great and it is good that the ISI are also creating a voluntary policy, but she believes it would be better if the government stepped in.

"At the moment our Select Committee is actually having an inquiry into the outstanding matters which are not being addressed by the government arising from financial failures - the banning of commissions is one of the items in the terms of reference."

Commerce Minister Simon Power was not available for comment.

SiFA chairman Murray Weatherston wonders whether the ISI has asked its members, given that a fair amount of product is based on the commission model and questions how it will implement the voluntary Code.

He says an unintended consequence will be that some low-income earners will no longer be able to afford advice.

Professional Advisers Association (PAA) chief executive Edward Richards says he does not think there is anything intrinsically wrong with commissions on investments provided that there is disclosure given clearly to customers at the time advice is given.

"There is no magic bullet, banning commissions doesn't mean a solution has been found, it's much more complex than that."

McMorran says there is a perception that commissions influence adviser investment decisions and there is not any point trying to fight it.

"We don't have to follow the lead of Australia but what are we waiting for?

"The banning of commissions is happening everywhere including in Australia and the United Kingdom, most regulators feel it is the way to go."

She says New Zealand is trying to create an environment where people will feel comfortable about investment and the government will have to look at the banning of commissions.