Neil Macdonald

The AMP Financial Planners Association (ampfpa) has selected leading Australian law firm, Corrs Chambers Westgarth (Corrs) to investigate legal action available to ampfpa members, including the potential for a class action, against AMP Financial Planning (AMPFP).

The ampfpa surveyed its members following AMPFP attempts to make changes without notice to its Buyer of Last Resort (BOLR) policy in August 2019 and found that a very high proportion was interested in pursuing legal action. The survey had a response rate of over 90%, with more than 93% of respondents indicating they support legal action.

Since receiving that response, ampfpa has been meeting with and interviewing various tier one law firms to identify the most suitable firm to nominate to act on behalf of members.

Neil Macdonald, ampfpa CEO, says, “After considering the options and meeting with and interviewing a number of tier one law firms, we believe Corrs meets the criteria our members wanted.”

Corrs is currently undertaking a range of investigations into the potential claims that may be available to ampfpa members, including the potential class action. Members wishing to explore their legal options via Corrs are being encouraged to register their interest with the firm.

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Neil Macdonald

Members of the AMP Financial Planners Association (ampfpa) are stepping up action to contest changes announced by AMP.

Ampfpa CEO, Neil Macdonald said, “AMP is on the record saying it is trying to right some of the wrongs of the past – it cannot right wrongs by doing the wrong thing by its own people.”

The ampfpa has surveyed member practices about the action they want to take and received a response rate of over 90%. “Of those who responded, over 93% indicated they support legal action,” he said.

To that end, ampfpa has arranged legal packs outlining the available options for its members and is seeking additional information from them.

“We are aware that tier one legal firms are prepared to run a class action against AMP and funders are available at very competitive terms,” Mr Macdonald said. “Our members intend to hold AMP accountable for the severe financial, reputational and psychological harm it is inflicting on its own advisers.”

On 8 August 2019, AMP announced that it intended to cull its adviser network and slash the amount it would pay under its Buyer of Last Resort (BOLR) terms to exiting advisers from four times recurring revenue to a maximum of 2.5 times.

“This action was taken without consultation with ampfpa, without the required 13 months’ notice to advisers, and after AMP assurances that existing BOLR arrangements would not change,” Mr Macdonald said.

As recently as May 2018, AMP Financial Planning’s then managing director met with AMP practices around Australia to reassure them that prevailing BOLR terms would remain the same.

“Based on this assurance, many practices may have made a decision to stay on with AMP last year, rather than exercising their BOLR rights,” he said.

The ampfpa has prepared an issues paper on behalf of its members, as well as member questions for AMP. The ampfpa has invited AMP senior management to attend an afternoon meeting to be held later this month with advice practices staying on with AMP and the ampfpa has also written directly to individual members of the AMP Board of Directors outlining ampfpa’s concerns. This letter followed two previous letters that ampfpa sent directly to each individual member of the AMP Board on 5 August 2019 and 7 August 2019, both of which were ignored.

“The response we received to the third letter came from AMP management and does not inspire us with much confidence.”

Mr Macdonald said the ampfpa objects to suggestions that the advisers currently being culled by AMP are those who will not be able to meet new compliance obligations or will not be able to transition to a fee-for-service practice.

“It has been reported in the media that AMP has identified practices that won’t make it through the transition because, ‘their business economics simply aren’t strong enough’. In our opinion, what this actually means is that AMP thinks they cannot profit from these practices and so is organising their exit. This does not excuse AMP from honouring the agreements it has with these practices and the BOLR terms that were in place before 8 August 2019.”

Mr Macdonald said the ampfpa is aware that members are contacting their local Members of Parliament and Small Business Ombudsman offices in their home states to air their concerns. “Several ampfpa members are actively pursuing these avenues,” he said.

The ampfpa would prefer to consult with AMP to arrive at a fair outcome for their members, their members’ clients and AMP. “In the meantime, AMP should pay the agreed BOLR multiples to those who have previously provided their notice.”

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Neil Macdonald

AMP Financial Planners Association (ampfpa) will be contesting changes announced last week by AMP to its Buyer of Last Resort (BOLR) terms.

Ampfpa CEO, Neil Macdonald said, “AMP is contractually obliged to consult with us over changes to the terms and also to give our members 13 months’ notice of any change that will have a detrimental effect on them. AMP has done neither.”

Mr Macdonald said AMP’s pinning of BOLR to what it claims is market value of 2.5 times is disingenuous.

“Advisers had to pay four times recurring revenue to buy into the right to service an AMP client book.  That was the price set by AMP. It was never a market value. The adviser did not own the client book or any goodwill and would never have paid four times without AMP’s promise to pay four times when the adviser retired from the industry.  This was AMP’s mechanism to attract and retain advisers long term.  But now, AMP is wanting to keep the four times entry price for itself and only pay back 2.5 times.

“AMP has already broken trust with its own customers and it has now broken trust with its own people,” he said. “The reduction of the multiple applied under the BOLR terms is potentially disastrous to many advisers, particularly those who have given notice but have not yet been bought out.”

Overnight, many advisers who have invested four times recurring revenue and provided years of service to AMP and to their clients, have seen the amount promised by AMP on exit decimated. “These are typically small business people on the brink of retirement who may now be forced onto Centrelink benefits when they exit.”

Mr Macdonald said ampfpa is also gravely concerned about AMP advisers who have been induced into debt by AMP to buy books from exiting AMP advisers at four times recurring revenue.

“These were valued by AMP for lending purposes at four times recurring revenue and in most cases the purchase was funded by loans from AMP Bank or another tripartite banking arrangement, again at four times recurring revenue,” he said. “In many cases advisers had to put up their family homes as security.”

Given the stress on business revenue as a result of increased back office obligations and changes to revenue streams, Mr Macdonald said repaying the loans will be extremely difficult for some advisers.

“Many advisers stand to lose their homes and some will face bankruptcy,” he said. “We are concerned about the potentially devastating flow-on effect of the financial loss in terms of the mental health of advisers, their families, and their staff, as well as the impact on their clients. What will happen to the clients of the advisers that AMP forces to move on, advisers who cannot, due to AMP imposed restraints of trade, work in the financial services industry for at least three years?”

Mr Macdonald also said that AMP’s announced intention to divest itself of many advice practices and service customers via robo-advice, digital solutions and employed advisers means many consumers will no longer be able to source locally based personal advice tailored to their needs from AMP, only AMP approved product advice. “In our opinion this would reintroduce a sales culture and that is a very poor outcome indeed for consumers and a very poor outcome for Australia.”

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