AMP has started the process of notifying advisers of their intention to cancel their authorisations. The move was confirmed yesterday by an AMP spokesperson although they declined to comment further and did not specify how many notifications have been sent out to date. Some media reports say the termination notices have been sent to hundreds of AMP aligned planners already. Meanwhile, The AMP Financial Planners Association (AMPFPA) may engage a litigation funder to help underwrite a class action against AMP Limited in regard to the companies changes to their Buyer of Last Resort (BOLR) scheme.
In an internal email to advisers, Alex Wade, AMP's head of wealth management, said that it had become clear that some advisers were not going to meet new regulations imposed by the government to abolish commissions and increase compliance.
AMP confirmed the contents of the email which stated "We have identified a number of practices that won't make it through this transition because their business economics simply aren't strong enough…we have started communicating to those that will no longer be licensed by AMP in the future".
AMP recently announced an aggressive restructuring plan that included lowering the agreed guarantee to its aligned advisers to buy back their client registers from 4 times revenue to a maximum of 2.5 times. The IFA published the account of an anonymous AMP advisers onerous experience of lodging a BOLR application earlier this year. The adviser said “AMPFP does not want to pay…they have delayed my health release and kept placing additional obstacles in my way so I could go past 9 August, when they changed the BOLR arrangements and reduced revenue from 4x to 2.5x."
AMP responded by saying “Advice practices with a higher proportion of grandfathered commissions as part of their revenue will be the most impacted by the buyback changes compared with those who have moved their business and client relationships to more contemporary fee structures”.Their statement continued, “We care about the welfare of our advisers and are treating this situation with care, empathy and respect. We continue to support advisers with a range of initiatives through this period.”
AMP has signalled it expects to spend $550 million on "adviser retention and support" as well as client "register acquisitions" over the next 18 to 24 months. AMP’s CEO Francesco De Ferrari said the group planned to spend over $1 billion as part of resetting its new wealth strategy.
That amount could become greater if a potential class action from AMP’s aligned advisers successfully comes to fruition. AMP Financial Planners Association (AMPFPA) chief Neil Macdonald said advisers now faced defaults on loans that had been based on the original more generous buyback terms. "We've got people who borrowed maybe a million dollars to buy a register that AMP told them was a good idea to do, and now that million-dollar loan is still outstanding, but the asset backing is worth $500,000,"
In a letter to members, AMPFPA said in its view of how the BOLR Policy operates, members had a range of potential legal claims against AMP including with regards to timing and notification of the changes and also for damages resulting from AMPs conduct. The letter also asked members whether they would be willing to contribute to a fund to pay for a class action or interested in turning to an external specialist litigation funder - or engage in a combination of both. The group acknowledged that its members may choose to take their own legal action and also that potential claims might be capable of being resolved by way of a negotiated agreement with AMP.
Speaking to Professional Planner about AMPs new strategy, Wade anticipated that there will be a lot of noise from advisers within the network as they come to grips with the revised valuations of their businesses. The aggressive nature of the company’s “re-set” and their desire to draw a line under the past 18 months of disastrous headlines and performance – which has seen its market value fall by more than two-thirds and the loss of billions of dollars in fund outflows should not be underestimated.
Admitting that AMP would not be able to judge the success of their new strategy for 3 years, Wade was simultaneously bullish and hopeful - “The fact is we faced into the past, we wrote off a truck load of money to address the legacy and do a reset. We’ve announced we are going to invest a huge amount in the go forward. I hope that will give people confidence – not just investors, or partners – that this is going to be different”.
Time, as always, will tell.
Article by:
Comments5
"AMP sold those registers at 4x and clipped the ticket for the adviser recruitment number which was part of management KPIs, getting the orphan book out of the orphan pool, and the loan with AMP bank and the flows onto AMP platforms and product. The registers were rubbish and PSO advisers didn’t get to choose what they bought except for postcodes but were directly told it didn’t matter if they paid 4x for rubbish because you’ll always get 4x back. And if a single planner wanted to join AMP they were forced to buy these books. What a disgrace. The only honourable thing thing to would be for to let PSOs hand their registers back, AMP bank to write the loans down and not enforce the non compete clauses if planners are being terminated. How can you have loans under management like that. Sure change your business strategy but acknowledge your previous strategy directly involves people’s livelihoods and debt you structured. "
Minion 12:23 on 09 Sep 19
"The practice that needs removal is the one that took a day one demutualisation peak share price of $45 to todays penny dreadful.Integrity and honesty replaced by greed and self interest.AMP was for a moment Australia's biggest company,today can it survive."
peter 09:41 on 07 Sep 19
"AMP responded by saying “Advice practices with a higher proportion of grandfathered commissions as part of their revenue will be the most impacted by the buyback changes compared with those who have moved their business and client relationships to more contemporary fee structures”. Their statement continued, “We care about the welfare of our advisers and are treating this situation with care, empathy and respect. We continue to support advisers with a range of initiatives through this period.” Hmm, I'm sure that AMP 'cares about its advisers' and it's "treating this situation with care, empathy and respect." AMP doesn't even know what those words mean let alone practise them. And this is unlikely ever to change. As a former adviser (we were called "agents" then) AMP was and is a cold-hearted, stony-faced organisation, brutal to its external personnel. AMP is on the backfoot now and deserve to be. As the oldest Australian life insurer AMP has never been anything else but a disgrace to our industry. "
Paul 16:49 on 06 Sep 19
"I have no problem with the BOLR re-valuation re-set, however it should have been done that was fairer. Planners close to retirement as well as those planners who have purchased registers in the last 2 years have no hope. I doubt that AMP "didn't know" these changes were coming so how could they have sold these businesses at 4x knowing that the reductions were coming? If you can't treat a client that way then please explain how a loyal AMP planner can be?"
John 15:53 on 06 Sep 19
"I know it's a tough business environment and AMP have decided to "re-set" but surely AMP bank they can't expect to be repaid the full amount of the loans they made to advisers to buy books based on 4x rev that are now worth 2.5x? It not on open market like a house price - they had contractual agreements in place?!? If a class action got up - I wonder how deep AMP would be willing to dig into their pockets? Any action would have to favour a massive business - they could just stall and extend until the advisers ran out of money and will..."
Shabby 14:53 on 06 Sep 19