The Advisers Association chief executive Neil Macdonald told ifa that Corrs Chambers Westgarth was running the action on behalf of over 100 former AMP advisers who had been terminated following a drastic shake-up of the group’s wealth business late last year.
“Our understanding [is] it’s imminent, we believe the things that need to be done to lodge it are pretty much there,” Mr Macdonald said.
Mr Macdonald said the legal argument to be made by the firm would centre around “contractual change for adequate notice”, and whether AMP was required to give a year’s notice to affected advisers before any write-downs of business values could come into force.
“There is a clause in the contract and it basically says that if there is a detrimental change [to values] AMP has to give 13 months notice, [and] advisers can give six or 12 months’ notice to exit before the new terms come in,” he said.
“There is a separate clause that says ‘subject to the above, if it’s economic, legislative or political changes then AMP can make changes’, but the intent is that that was only ‘subject to the above’, which is if it’s detrimental they’ve got to give notice.
“That would be the core argument – they might think they’ve got the right to change [terms] unilaterally whenever they feel like it, but obviously no one would sign up to a contract like that.”
The changes to AMP’s advice arm in August 2019 saw the group reduce guaranteed values in its BOLR contracts from four times to 2.5 times revenue, as well as terminate 250 planners that were no longer profitable.
Mr Macdonald said the mediation process between terminated advisers and AMP, which had so far seen over 60 advisers referred through the Australian Small Business and Family Enterprise Ombudsman, had had mixed results and been marked by delays.
“The mediation seems to have taken a long time – the ombudsman initially said they’d agreed to do it in November and December [2019], then it was pushed back to January, and still not everyone has been through it and we are six or seven months down the track,” he said.
“The other thing is a number of people have decided it’s not worth progressing because based on what they’ve heard, it’s not going to be useful. AMP may be making some concessions but I don’t think they’re making many.
“There’s been quite a lot of emotional distress as well because some of the advisers have been there for 20 or 30 years and never had complaints, never had a failed audit.”
Labor senator and member of the parliamentary joint committee on corporations and financial services, Deborah O’Neill, has asked ASIC to investigate AMP’s treatment of advisers, with a report due this week as ASIC fronts the committee for an oversight hearing.
AMP advisers traded in FP client bases at around 4 times revenue
AMP set a floor price under BOLR terms at 4 times revenue
AMP loaned based on an LVR calculation that used BOLR valuations to ascertain the base value of the underlying client base
AMPFP had to issue the OK for AMP Bank to loan against an AMP client base
If an AMP adviser took over servicing of an orphan client then AMP charged the AMP adviser the BOLR value of that client and deducted this from the advisers fortnightly commission payment
When advisers purchased a client base from AMP they rarely (if ever) got files for those clients
AMP reduced BOLR values without notice
AMP stopped paying grandfathered commissions to advisers before the mandated cut off date
Following the removal of grandfathered commissions, AMP then issued termination notices to AMPFP planners/practices
The entire AMPFP business model, lending model and valuation model was based around the BOLR model set up by AMPFP. AMP advisers were encouraged to grow their businesses within AMP and to use the AMP business model to do so.
The AMPFPA have been found out to be a toothless tiger as far as most practices are concerned.
Other media reports are suggesting that AMP has terminated advisers for insufficient product sales then refused to allow those advisers to transfer their clients elsewhere, and imposed a 3 year industry exclusion on them. If this is true then that is the real issue, not the BOLR adjustment.
But is it really true? Or are these advisers conflating issues, to try and recover the money they lost on a poor investment decision to purchase an overpriced AMP client book?
AMP – couldn’t happen to a better organisation Hahahahah. Scammers
bring it on AMP are confident they have done the right thing and the planners are not fair in their demands
Years ago I questioned the validity of the BOLR concept around the time of the de-mutualization. I query the statement ” obviously no one would sign up to a contract like that.”
The AMP advisers I knew said AMP would always honor the “deal”. I then asked how many advisers had read the contract they signed, and how many sought independent legal advice. The answer was NIL to both-it was all blind faith.So if these advisers get into court it may not be good.
Hopefully one of the case outcomes may be AMPs contention, like that of ASIC, that a policy written 10 years ago can be failed at audit by an application of today’s compliance rules. I hear that is a common AMP tactic and is GROSSLY UNFAIR !
Shame on AMP – their true motive came out in the end – finally – but at the detriment of their loyal and hard working adviser base – who have built the AMP empire. Shareholders should revolt over such poor behaviour. AMP will not go unpunished.
The concern is not just with AMP. These institutions look at eachother’s behaviour to justify their own. Their moral compass is determined by reference to eachother. A class action is really important not only for AMP advisers but to put other institutions on notice.
In reality no adviser is getting 2.5x – the actual numbers are around 0.5x at best.
AMP has changed the 4x down to 2.5 only for some clients in the register. For most others the multiple is zero (and AMP writes their own rules as to which clients they will pay for and which they won’t).
Coupled together with the “remediation” program the planners are being pushed out with nothing or even with a debt.
I presume those clients with 0.5x or smaller multiples can’t be sold outside AMP? That would amount to expropriation.
No client could ever be sold outside amp. It was always a closed and artificial market. Amp always benefited as they would provide the loans, so a higher multiple meant a bigger loan and more interest paid to amp. When the time came for amp to buy back, all of a sudden they realised that they now had a BoLR liability and decided to screw everyone.
AMP doesn’t allow sale to external licensees. Technically in most cases, AMP owns the client but the adviser has the servicing rights.
#AMPareirrelevant
I would never have any dealings with AMP again. I have nothing but regret for my past dealings with this organisation and the sooner it is broken up and disbanded the better