At the Hayne royal commission hearings on Tuesday, counsel assisting Michael Hodge put the question to acting AMP chief executive Mike Wilkins whether advisers understood what was expected of them upon the change to fees-for-service in 2010.
“I think that a number of them did understand that, but also a number did not,” Mr Wilkins said.
“As the educational standards have improved, as the policies and procedures that AMP has put in place have tightened up, we’ve seen an improvement in that.”
Mr Hodge then asked if it’s a failing of AMP that for the next five years after 2010 it didn’t properly educate its adviser network that they needed to actually provide services in exchange for the fees they were charging.
“Yes. Our policies and procedures were – were not appropriate or fit for purpose at that time,” Mr Wilkins said.
“Why it is that you would need to tell your advisers that if they’re charging a fee for a service, they have to provide the service?” Mr Hodge continued.
“It would be a normal expectation that people would understand that.
“Outside of financial advisers, it’s hard to think of any profession or group of people that think if they charge money for a service, it’s OK not to provide the service?”
“You would think that where a fee has been agreed, the service would be delivered,” Mr Wilkins responded.
“That’s certainly what most professions are used to?” Mr Hodge asked.
“Yes,” Mr Wilkins said.
Mr Hodge then questioned Mr Wilkins on why that has been the case.
“I think where it was coming from was a transaction-by-transaction type arrangement where commissions, including trail commissions, continued. And there was, in the case of that environment, no expectation that services would be delivered for those trail commissions,” said Mr Wilkins.
From what i can see from this article, Hodge is just asking that if a payment is made then surely you would expect a service to have been delivered (not just a birthday card or BS newsletter). I quite agree with the comments. And for AMP not to know that their advisers (of which i was one at one stage and managed to escape) knew they should give advice is ridiculous. If that is the case then the level of intelligence of adviser is way down and we deserve all we get
They probably provided a service of some sort — they felt it was easier to not write down anything than read the 1,500 pages AMP issued as a compliance document / easy to read explanation. The biggest mistake I’ve ever made is becoming licensed through them as after two different licensees they are a different level of stupid from an organisation perspective.
[quote][/quote] Fee for no service is embarrassing and expensive for the whole industry, and when it rolls around to small/medium licensees it’s going to cause a raft of bankruptcies and probably suicides.[quote][/quote]
Yes it’s embarrassing for all. but as far as the bad for small licensee’s I don’t think so. Self Licensed advisers think about their business in terms of client numbers… we think differently…after all our heads are on the choppping block, for us it’s number of clients, hours in the day, time with family. Large bank owned/aligned and large independently owned licenses have business coaches and PD days and train advisers to think in terms of FUM, AUM- assets under management, revenue earned, funds inflow and outflow. They think about poor audit reports. I think about the penalty, fines and bans. Any one of my clients I can go to their file and pull out a RoA, SoA a quality file note, financial modelling etc.
AMP is a goner. The RC only brought forward what was going to happen anyway. The AMP advice and compliance models are hopelessly convoluted and difficult to follow. AMP have never modernised or taken a proactive approach to the business because they were making so much in dodgy fees that they didn’t have to. Now, they have an antiquated advice and compliance model that is simply unworkable and a product suite that is hopelessly out of date. New players such as Netwealth (and others) are gobbling up most of the growth in the platform markets leaving only AMP advisers referring business to AMP products. Since the advisers have an appalling compliance model to follow they have mostly given up on new business and are just focussing on servicing the existing book.
The AMP businesses are just so hopelessly out of touch with advisers and clients that they simply cannot survive in a competitive environment and the only reason they got as far as they did is because ASIC were asleep at the wheel.
I was AMP aligned for 12 years. Advisers all knew what was required. A small minority didnt care, and AMP should have gotten rid of them. But everyone else knew. This is just AMP throwing advisers under the bus…again. As most of the Fee for no service was due to AMP still taking advice fee’s when their was no adviser to service the client.
Please… Not saying you personally did anything wrong but the amount of times I have had a client come across my desk who has an AMP ‘Adviser’ they have never heard from since the initial SOA would make your eyes water.
Widely accepted there that you rollover super, tack on an adviser fee and load em up with insurance then never speak to them again until they try to turn off the fee or opt in is due.
Not just AMP advisers. MLC advisers and CBA advisers that clients could not pick out from a line up come across my desk all the itme.
Very true, and lets be honest, plenty of IFAs have done the same thing too. Buy books with thousands of clients, never speak to them and hope they dont turn the fees off.
Yep. AMP have nothing but “registers”. Whilst other advisers have clients and treat them like family. At AMP you buy the book, suck the blood out of it, and bleed the customer dry for five years and sell it all back to AMP. During that Five years AMP gets the FUM.
I’ve worked for an AMP licensee and last year did audit work at Deloitte for 6 months on banned,left AMP of their own accord,left the industry and existing AMP Advisers within their network.And yes it was purgatory which is why l didn’t last long. l was there with about 120 other AMP/Deloitte/Law firms staff working on the client remediation project. Cost to AMP would be tens of millions.
At the SOA front end the Advisers disclosed fees/charges/etc.,but when it came to sending out review letters in almost all instances it never happened.Some where picked up in Licensee audits,but the rest slipped through the cracks.There were plenty of warning notices on file too. You had to see to believe it.
The bigger issue with the Advisers being audited years after the event, was that we found were so many other compliance breaches.Working in the client’s “best interest” is an oxymoron at AMP licensees.
We found Advisers moving clients from one old AMP super to another every 2-3 years until they ended up in the North product.The clients were charged a new plan fee every time.Sure the overall fees were lower from old 1980/90/00’s legacy policies,but seriously.No one at AMP or Deloitte were interested in any other issue only on whether service was delivered where an Adviser fee was being charged.
AMP is not alone as Deloitte picked up two new contracts for similar work when l was there.
ASIC haven’t even got to the hundreds of small/medium licensees dotted around the country yet.
What a can of worms that will be. Stay turned.
Sounds great, another few years on that very nice daily rate thanks to AMP advisers and their CQ overlords. Merry Xma$ to all, and a very, very, very, happy New Year!
“Outside of financial advisers, it’s hard to think of any profession or group of people that think if they charge money for a service, it’s OK not to provide the service?” Weighed in Mr Hodge.
I can think of one. Lawyers. Acting on retainers.
Exactly right. This guy works out of the same chambers as a the retired father in law of a lawyer I know in Brisbane who has a particular hatred of financial advisers. I only found out today, and I smell an awfully large rat.
Who is he to dictate to my client how they pay my fee? Super is usually their second largest asset, don’t tbey have a right to use that asset to pay for advice on it over a 12 month period?
If ongoing advice fees go, that’ll create an even bigger sales culture and we will end up like lawyers, charging out my admin staff at $150 an hour to photocopy. Rise up kids, this is Michael Hodge is dangerous territory.
wait you aren’t already charging clients $150 per hour to photocopy? we have staff overheads etc to pay, if people can afford to pay $5 for a soy cappuccino, they have money to pay my fees.
i am not a charity , our minimum hourly rate should be $440 per hour and for staff at least $150 per hour
Very interesting. Hodge definitely seems to be pushing a personal agenda rather than sticking to the facts. Let’s hope Hayne ignores Hodge’s biased crusading otherwise the whole RC findings could well be tainted.
Funny, I told my old commission clients the trail was a retainer for our services . You ring me and I come out as well as sending out an annual renewal letter and a face to face appt .
Yep, and how many ‘mums and dads’ have a lawyer on retainer? None.
What is your view on staff at the Industry Funds? Should clients who contact the Fund be charged a “fee directly related” to that service or is as they currently do, charging everyone a little to provide service to those that need it somehow acceptable on one side of the fence but not the other?
Take it a step further for your “Mums and Dads” – lets do fee for service on Bank Accounts etc.
Interested in your argument – not agenda.
That’s why “Mum’s and Dad’s can so easily afford legal advice – good strategy.
How would you make lawyers affordable to the average Mum and Dad? I know, who cares, lets make it fair (fee for service). That way, those with no money get what they can pay for. Don’t you just love the “unintended consequences” of the last 15 years legislation. Do gooder never do good IMO. Personal Advice is largely now out of reach some (the simple cost of a SOA alone) and with the agenda being pushed re conflicts. Now, those unable to afford personal advice will go to the Industry Funds who give nothing but advice for that fund – and charge every member to service a few. Really, what is the agenda?
How much many thousands per day have Mr Hodge and Ms “Is that right?” Orr been charging us as taxpayers? Are their operating costs so high that they can justify their fees or do they charge so much because there is no political scrutiny on their industry?
Yeh who would think that AMP Financial Advisers should provide ongoing service and reviews to clients regardless of it being a trail commission or a fee for service they are paid ?
And yeh imagine management & compliance at AMP thinking that they should clearly explain to Financial Advisers the need for ongoing reviews and advice for clients that pay fees or trail commissions ?
Come on you can’t expect management to be that smart or have the time for that stuff. What with planning upgrades of their multiple beach holiday homes and Christmas ski trips around the world, who has time to actually manage AMP and Adviser compliance ?
AMP you are a dead duck i’m afraid. RIP.
Can you please advise me of you definition of “service”. ASIC has it’s own definition which surprisingly, means lots of “fees for no service” when they are not even looking at service.
Advisers just as guilty as managers here. Anyone needing it explained to them that you need to provide a service for remuneration should be out of the industry quick smart.
The point is service is not included in ASIC’s definition. Get it?
REP232 doesn’t say that at all. What is says, is that you need to do what you say your going to do, and your fee needs to be commensurate with the services you provide.
The client being able to call if they need you, or sending out a newsletter and birthday card every now and again is something anybody other business charges for.
Being available to provide services is called being in business, the other two are called marketing.
The definition used by ASIC DOES NOT include service. An adviser can service a client all they like but it will still be fee for no service – they only include advice. see comments below for a better explanation.
I understand this but this is just more of people trying to do as little as possible. A ‘service’ isnt being able to call if the client needs you and sending out a newsletter and birthday card every now and again. That’s just gouging.
Hey where is the next overseas AMP Conference ????
Yes, they were held every two years. $ensational they were. Canned in a few years ago. Practices were potentially getting ”education allowances”, for study/conferences, etc. (i.e. holidays).
Judging by their planned remediation costs….Penrith Panthers
Yep that’s about as far as OS from the eastern beaches :D:lol:
Tennis is the new thing – hosted by the Industry Funds for the benefit of members oops, Employers and Staff. How does that grad you?
Will AMP’s $1 Bill refund to clients include Senior Execs refunding part of their their salary / bonuses?
probably not.
Or their BDM’s and PDM’s on the gravy train commission based on how much their panel Flogs ( I mean writes) ?
I really couldn’t believe the salaries of these Brochure Delivery Men BDMs, all they would do was to lock in an appointment, to fill their diary, come to the office and talk crap, NO strategy or business planning at all. It is laughable, and where are they now…….
What he should have said is that back in 2010 it wasn’t law that every conversation was recorded. You cannot go back and ask why things were not done a certain way if it wasn’t a requirement. I have worked at three different dealer groups and they were all the same.
Advisers used to act as the distribution for different providers and were paid a commission to advisers as they had to produce the documents the advice, deal with the clients paperwork death nominations, cheque for super rollovers back then and chase up the companies back then. advisers did all the leg work made sure that the investments where invested correctly. its mad watching these corporate guys moving from one company to another fucking the small guys over. Most advisers in the AMP network a all small business owners just like everyone else within the market trying to help their own customers with services.
these companies just love blaming the advisers who work within the structures given to them every time no matter what happens they always blame the advisers.
we might have to start doing what lawyers do and charge for 6min increments but we might have to produce an SOA and provide PDS/ FSCGs and adviser profiles and no advice warnings before we send that invoice to stay compliant lol
yet Industry funds have roll all your super just one click on while your completing a direct debit form and everyone gets charged for Intra fund advice which is the same fucking thing as the old ongoing commission for advice
Oh no the Industry fund planners get paid a ” Salary ” no commission so lets not disclose it ??? Go figure
well said, its also sad to see so many nasty apparent advisers comments here. Its not to different in whatever dealer group you operated in and lets not go into to the nasties in the closet of many of own licensed advisers. it was well considered hat it was just easy to be under the radar as its not a big scalp for ASIC. Pay your own auditors eh. Lets all not throw stones, we have a industry potentially at its knees and with a large potential number of advisers acknowledging that its no longer worth it and its now a challenge on ethics. That last bit i expect a lot of self righteous people wont get. Now its only the rich who can afford and the needy will be left hanging and many claims will not get paid. And that’s no fault of the insurer or superannuation provider. If you have completed 400 to 1000 plus claims, then i guess you would understand
With David Murray & Rick Allert as chairmen of AMP & AMP Superannuation Fund will it improve?
Haha. I think we all know Murray will try to justify how this is ok and we dont need to change. The messiah of vertical integration.
David Murray is now a Demi God . Let’s not ask him anything now , its embarrassing . What ask him why he was paid $20 million a year and expect to know what was going on at CBA . Can’t be doing anything important these days ??
There is a distinct difference between providing a service and providing advice which regulators don’t understand. Not every interaction results in a 50 page advice document.
Advice has a far higher bar and requires (due to it’s nature) a more intimate relationship and comprehensive documentation etc etc.
I’d suggest that most advisers (if not all) would have provided and still do provide service as distinct to advice – many clients value this service. Older clients love a visit and a coffee and consider this part of the service. Advisers would typically only have provided advice if the client’s circumstances dictated or if there was a significant legislative, product or market change that dictated an adviser actively provide advice to a client that may not have been expecting it.
I just paid $463 for a plumber to spend about an hour at my home replacing an S bend – good value I thought.
A younger worker (or indeed many female members) with a balance of $50,000 based on a fee of 1% would be paying $500 per annum (similar to the plumber). This $500 covers servicing provided by advisers and their staff (change of address, ad hoc calls for information, balances inquiries, super details for a new employer etc etc) as well as an offer to review strategy which would lead to advice, updates on what our govt is doing this year to sabotage super and the rest. There is not a lot left for comprehensive advice. If clients don’t think this is good value then why don’t they cancel the fee? The issue has been played non-stop for years in the media, it is on super statements, deafening ads from ISF and the nonsensical Fee Disclosure Statement also reiterates the fees.
Fee for service is a fee for [b]service[/b]. Ongoing Service Agreements list these services and fee disclosure statements reiterate this every year – advice may or may not be a service offered but it certainly isn’t a forgone conclusion.
Well said – It is not merely the sensationalised “Fee for no service”. Even though I have no love lost for the Banks and other predatory Institutions, their responses have been pathetic, and allowed a misinformed, “misleading and deceptive” narrative to be told by ASIC and in the RC. “Service” is distinctly different to “Advice”.
1. IMO, their approach has been “Keep your head down, say ‘Yes, I agree’ to almost everything the RC purports; keep going as far as possible without change, while s__tting on, and blaming Advisers as much as feasible while not being blatantly dishonest.
2. As far as I know, in regard to “No Service”: Institutional accounts are being maintained and administered; Managed Investments continue to be managed, hopefully for profit; Reports, Tax, and Statements continue to be reconciled and issued; Fiduciary Duties are fulfilled, even to the deceased; Executors have an address and people to speak to. All this costs money – so why shouldn’t Administrative Fees be charged, whether as ongoing trail or specified fees?
Advisers maintain records and files; pay ongoing office costs, PI, Licensee Fees, etc, etc, etc. This is a Service; it costs money, and not everyone needs to be coddled every other day and ensured that a “Menu” of services are indeed provided in full, itemised in detail, and delivered at a arbitrary snapshot in time.
I have had very large clients call me after 8 years of silence; even a “Long lost client” after 15 – and he received “The full measure of devotion”, although I think I was receiving ~$3. per year in “Trail Commission”… Others want a catch-up fortnightly or monthly. People are different, need different things, and want to pay differently.
3. Regarding the “No Advice” BS:
* Clients are not dumb – when something involves money, they invariably manage to find their way to you;
* Financial advice is medium to long or very long term. It is transitional and transformational, rarely transactional, as much as the self serving bureaucrats, ideological regulators, predatory lawyers, juvenile media, and idiot politicians try and make it so, or misuse and abuse an entire class of people and sector of the economy for their own advantage and purposes;
* Financial Advice tends to be “Lumpy”; people move along within their own life system until an event occurs – a birth, death, marriage, new job, inheritance, etc. When that event occurs [with years in between events], the advice and activity is often interconnected and cascades from one situation to another, while people’s status also changes relative to family and institutions.
The lumpy advice tends to be more complex and expensive, while IME, the VAST MAJORITY OF PEOPLE prefer a small ongoing fee to fund this relationship, not encounter a huge one off bill for unpacking and resolving the accumulated, interconnected issues.
* No institution, Government, or Regulatory Body knows, or can know what I am doing with my clients; whether they are acting or preparing to act on advice, previous advice, informal conversations, ruminating on, or arriving at a point in time where action is necessary, possible, and/or feasible.
* The idea that somehow I need to account for every phone call, sentence, breath, grunt, “Hmmm”, email, and client interaction is idiotic and ridiculous; it is typical of the “Deconstructionist”, “After the Fact” 20-20 hindsight commentary of post facto, gossiping, do nothing “judges and priests” of society – grandstanding politicians, the media, the bureaucracy, and the ambulance chasing legal “profession”.
4. IMO, the conduct of these witch hunting “judges and priests” manifestly contradicts the generous, “Contribute to society”, “Noblisse Oblige” “professions” were created and built on, as opposed to the cynical, rapacious, abusive things they have become.
IMO, Australia is well on its way to be a litigious, socially paralysed, rigid, bureaucratically choked “Lawyer’s Paradise” of “Bureaucratic Totalitarianism”, economic corporate enslavement – lacking innovation, independence, initiative, and personal responsibility; ultimately leading to “S__t flows downhill, “Blame someone else” tribalism, fragmentation, and collapse.
What a load of tripe. Just because our office costs etc are high doesnt mean thats justification to charge clients fees for nothing.
You mention clients calling you after 8 or 15 years. Whether its $3,000 per annum or $3 per annum, if they arent meeting with you every year they shouldnt be paying a fee. They can always be invoiced when they actually need something in future.
This perception is why the industry is getting absolutely polaxed at the moment.
The difficulty for me is the difference in interpretation by ASIC.
For the last decade we have operated on the assumption that as long as we fulfil our contractual obligations, we are ok. For us, that means we contact the client 5 times to get them in for a review using different contact methods. If they can’t come in within the 12 month period, we still complete the review, but it just moves to the following period, so they get 2 within 12 months. If they decline the review we note on the system. Our licensee supported the approach.
However, ASIC now say contract law is irrelevant and it’s down to efficiently honestly and fairly. Basically meaning that if an advice doc isn’t on record for the 12 month period it’s a full refund. It would have been nice to know this a decade ago so that we could have built our business processes around it.
For those that say the above approach doesn’t meet community standards, consider this.
You buy a plane ticket. The airline sends you reminders of the date. You decide that you don’t want to take that flight. The airline then offers another flight free of charge on a later date. Should they be forced to give you a full refund just because you didn’t want to board the flight? And should the other passengers be forced to pay a significant premium because of the possibility that some will decide at the last minute they don’t want to fly?
Fee for no service is embarrassing and expensive for the whole industry, and when it rolls around to small/medium licensees it’s going to cause a raft of bankruptcies and probably suicides. But the reality is more complicated and nuanced than the RC would believe, and certainly than has been reported in the press.
I understand what you are saying but I dont agree with the analogy.
You compare financial planning to a plane ticket, if the client doesnt respond, no service rendered. The difference there is that I dont pay my airline a retainer each year whether I fly with them or not. I buy one plane ticket when I need it, purely transactional. Now I don’t think financial planning should be that transactional, but I do think this whole issue and argument goes away with everything being subject to opt in, including fees/commissions previously grandfathered. I however know that many advisers will not want this as it means that in the next two years they will lose a lot of their revenue base as their fees cannot be justified.
Do you pay for insurance? If yes, then unless you claim, where is the service? And I don’t doubt that, on average, your claim cannot exceed your premiums.
And super funds. They charge an admin fee, no? But what if I don’t want my money in a super fund. Maybe I’d like a guaranteed return by knocking down my mortgage. Oh hold on, SGC is legislated. Nope, no choice there.
My taxes. They pay for someone else’s age pension and GPs bulk-billing. Certainly not a service to me. But hey, it’s legislated.
In each of those cases, I am charged fees for something I may not agree with.
The point is, that social licence is a grey area, and open to debate. Many advisers were doing the right thing, even when commissions are being paid.
We also know that ASIC has hammered one of the largest industry funds for fee-for-no-service (State Super, $37 million in refunds already, owned by First State Super who has 700,000 members). Yet, nowhere to be seen in the Royal Commission stand.
This issue is not as black and white as you’d like it to be.
Insurance – The service is the mitigation of risk. Does my financial planning i pay a ‘retainer’ to indemnify me for all investment losses like insurance does for loss of income? No.
Why is it the super funds fault SGC is legislated? They are still providing a fund for that admin fee for the money directed to them. Thats a completely redundant point.
We can partially agree on taxes but thats to keep the wheels of society moving and not a relevant example to financial planning lol.
I agree on First State Super, I do not defend that. However, I dont think simply saying ‘these people do it too so its ok’ is an argument to charge people and not provide them with any value most years for it.
Frankly, reading your comment and your justification makes it clearer why we are in this mess in the first place. Just seems like the ‘I bought a heap of books I never thought I would actually need to service and now they’re gonna be worthless, woe is me’.
Insurance is a product, not a service.
whoever you are, you are very smart, genuine, considered and i have no doubt a real success in life professionally and personally.
our problem as an industry and profession is – and I thought about this very long and hard – we have turds running the industry, turds representing the industry and mostly floating turds working in the industry that just can’t be flushed away
Sing it soul sister! I’m right there with you. We need the RC to hear from private family businesses that look after the clients and do a damn good job. These lawyers are confusing themselves – bank owned product sale is different from a consenting educated adult asking for advice and paying for it from their fund.
Very well said. I have copied your comment for future reference. Thank you!
[quote=Michael]A fair enough oversight really – because it wasn’t like FOFA was discussed much at the time.[/quote] Michael from AMP, thanks for your input.
A fair enough oversight really – because it wasn’t like FOFA was discussed much at the time.
Amp passing the blame onto advisers once again…………boring
They cannot help themselves. Any time there is a problem in AMP they attack the adviser network.
Whilst telling the adviser “you are important to us”. Please don’t panic as well use you as a human shield to protect ourselves and our pay packets.