AMP Australia CEO Alex Wade fronted a parliamentary committee on Friday (22 November), where he was quizzed on AMP’s decision to transfer 557,000 inactive accounts, or 25 per cent of the group’s client base, to the ATO. Approximately 75,000 were transferred to AMP’s eligible rollover fund (ERF).
Committee chair and Liberal MP Tim Wilson asked what the performance and fee structures of the ERF are.
AMP’s Lara Bourguignon, who heads up the group’s wealth and SuperConcepts business, said she would need to take the question on notice and provide details at a later date.
“You don’t know the answer to that question?” Mr Wilson asked.
“I’d just like to take it on notice and confirm,” Ms Bourguignon said.
“Do the fee structures vary compared to other AMP fee stuctures?” the MP asked.
“My understanding is that it is a very low fee but I would like to get that information to you,” the AMP executive said.
Mr Wilson asked how the money is invested once it is put into the ERF.
“Again, I would like to confirm that,” Ms Bourguignon said.
Mr Wilson responded by saying that is “seems very odd” that the SuperConcepts CEO would not know this information. When he asked the other AMP executives whether they know how the ERF funds are invested, Mr Wade said he also didn’t know.
“But you’re the head of super,” Mr Wilson said to Mr Wade.
“I am,” he replied.
“But you don’t know what happens to the ERF?”
“As I alluded to earlier,” Mr Wade explained. “We are obviously a very complex organisation at the moment and we are simplifying the organisation.”
The committee heard that AMP has seven funds, including the ERF, which Mr Wade receives reports on monthly. He confirmed that he has no knowledge on the performance or fees of the ERF.
Mr Wilson concluded that he was “disappointed” by AMP’s performance during the inquiry and the inability of executives to answer questions. At one point he asked Mr Wade why the group CEO, Francesco De Ferrari, was not present. The MP suggested that Mr De Ferrari appear before the next committee hearing.
Wade, De Ferrari and the other muppets that are driving this once great business off a cliff, should not be responsible for managing a cup of tea.
They are too preoccupied with their “main game” at the moment of ensuring AMP don’t get sued for their recent attempts to lift about half a billion dollars of equity from the hard working planners planners that do the work in ensuring their clients don’t get put into these accounts. Francesco wasn’t there as they can’t afford to expose the fact that he has even less idea, being merely the transitory imported toe cutting figurehead.
Some pretty forgiving comments here. Pretty sure Mr. Wade and Ms. Boring could tell you to the cent:
– their gross annual salary
– their net monthly salary
– all bonuses they are entitled to and when
– the amount they have in superannuation
But they don’t know the fee structure of a simple product they just transferred tens of thousands of ordinary Australians’ super accounts to?
This is a pretty stupid response to the question.
Then again Tim Wilson expects the person to know detail about a product that they have in their suite which is like a bastard son.
Fee is set on a tiered basis,
a 0.69% investment fee and based upon your account balance ranges from 2.36% per annum to 0.65% per annum.
Then you have a indirect cost ratio of 0.06%.
This means if you have say, $2,499.00 in the fund, your fee is 3.11% per annum. or $77 a year. Similar to HOSTPLUS.
Why they can’t just have a flat portfolio fee of $77 a year (including GST) and charge an investment management fee is beyond me tho.
So, There are Four Tiers to this “Cake”
Tier 1 is 3.11%
Tier 2 is 1.93%
Tier 3 is 1.64%
Tier 4 is 1.4%
Now, the average AMP balance is 4K – https://www.superguide.com.au/comparing-super-funds/list-of-all-superannuation-funds and there are between 400,000 and 475,000 AMP ERF accounts.
Back of the envelope calculation is $126 per account per year. So, what, $50 to $59.85 million a year in fees before costs.
I mean I dunno about you mate but if I ran a business that had over $10 million in revenue I’d like to know how.
Can someone tell me if I have missed something above?
They didn’t no the answer as they NO the answer is HIGH fees for cash account, that was selected to benefit AMP. They didn’t want another RC moment. AMP will be the next kodak!t
Incorrect;
You’ll need to add on 0.13% transaction costs then take off the 0.03% included in the other indirect costs that you mentioned, plus you need to add on the property costs of 0.02% also not included above but 0.02% last year, and also the borrowing costs of 0.02% also not included.
Everyone – “Given what happened at the RC should we prep a bit this time”
Alex Wade – “Nah, i got it…..”
Also AMP were the last to front the Commission. Guess what? The Commission asked every other participant the same question. How could they have not been prepped for this?
She should have suggested that Tim Wilson google it with her, there & then. It is a publicly available document, as required by ASIC.
Surely they could have summarised with “the fees are high for what you get and the returns are low because we put the money into cash so we make more money off clients who aren’t interesated in their own super”. We all know that’s the answer.
I’m impressed the AMP executives knew the address where they had to go and at least this time they didn’t need to count above 20 which is a shame since they have been practicing since Jack got confused.
The change over time has been when employees worked their way through a company they learned how all the products and services worked and operated. With the current environment where people move around every 3-4 years there is no chance this can happen. There are very few people at AMP who know how the full details about how their products and services operate and no one is teaching them these days. It is a failing of corporate Australia.
30 seconds googling would have given the answer. Either side could have done this – didn’t the executives have assistants in court? Obviously the committee could have provided the answer as well.
Fees are 0.69% + ICR 0.06% + 2.36% for the first $2,500, 1.18% up to $10k, 0.89% up to $50k, 0.65% above. Limit of 3% for under $6,000 accounts.
For $7k it is 2.4% or $165
For $20k it is 1.9% or $387
For $50k it is 1.8% or $879.
That took five minutes to put together.
Exec’s didn’t know they had a web site…?
Should have just said $1.50 per week, and then whispered “other costs may apply”.. Isn’t that the standard response?
apparently that’s how much it costs to run Hostplus. Consumers can’t tell what fees they pay when Super funds tell them it’s $1.50 per week plus additional costs may apply whilst conveniently overlooking, Manager fees, Performance fees, borrowing costs, indirect costs, direct costs, transaction costs, flat admin fee and % based admin fee. Then you report performance after some of these costs and not others.
This is a classic example of FASEA targeting the wrong people. I’ll bet not a single AMP exec appropriately qualified and neither will they be required to be. Yet their wrongdoing effects hundreds of thousands of customers.
FASEA? Its a parliamentary committee.
FFS! Any junior product manager trainee or customer service officer would know this. And they’ve signed off on transferring 75,000 customers to one of their biggest funds. Wow, that’s some executive management they’ve got there.
maybe because that’s their only job. they wouldnt be running the company.
Agree with Robert. FFS!! if you are going to transfer 75,000 customer accounts you need to be aware of the fees and how the money is invested. the decision to transfer $75,000 accounts would have been signed off by these same senior executives. A little too much “Dont know” & “Dont Care” particularly give how we are all under the microscope.
Dear Anonymous, Wilson asked a simple question about product fees and they didn’t know the answer!
Yes he did. Though at the same time he’s being asked by someone who’s even less qualified or experienced to judge others or make rules over industries of which he has no clue. He doesn’t even have sufficient qualifications or life experience to be a politician.
If Tim Wilson had any clue himself as to how businesses are run – especially within the financial services/funds management sector – he’d know that the head of a particular division isn’t necessarily in the know of the finer details of a particular investment strategy, its performance or its fees. Given his portfolio includes committee membership for Aged Care is he able to cite the current formulas for calculating aged care benefits? His membership of the Legal Affairs committee must surely mean he has a legal background, no? No. And why is he in a position now where he feels qualified and experienced to be telling others in their positions what they should or shouldn’t know? Becuase he’s a politician, and those who can’t do, lecture others it seems.
Perhaps the politicians should be subjected to similar minimum education standards of the type they’re expecting financial services professionals to hold. Advanced Degrees in those topics they’re making decisions over (ie have a Treasurer with an Economics, Accounting and Business background; a Attorney General who’s a lawyer/barrister/judge, etc) as well as X number of years practical experience or else they lose their positions.
I don’t know when things changed here, but I was always of the opinion that governments and politicians are elected to represent the interests of the public who are voting for them, not dictate to them with no understanding of what they’re dictating over. I’m not too sure the average Australian client sees any value in Advisers giving 70 page SoAs, or having a handful of papers saying they completed purely theoretical studies that provide no benefit to Adviser or client whatsoever.
“The committee heard that AMP has seven funds, including the ERF, which Mr Wade receives reports on monthly.”
No the problem is Mr Wade is a Banker, and doesn’t know anything about Financial Planning. They just transferred 75,000 client to AMP ERF and Mr Wade never took the time to actually understand the fees involved in such a large transaction.
Yes this is certainly a problem – that I completely agree with. Though the ones making the rules for all and judging them by them are incredibly unqualified to do so. Even more than the bankers.
We already knew these execs were out of touch with client and adviser reality but to not be able to explain their own products is surely an indication that they lack the competence required for their roles let alone justify their remuneration. And their business strategy is to deal directly with customers ?
blind leading the blind. 1% fee on cash, make CFS look good at ZERO %. Wonder how long it will take for someone to take control of this negligence and put someone in with a brain. At least they can’t pin any advisers on this one, however, will anyone get pinned for this gross negligence and lack of knowledge, fools running AMP with no knowledge except how to extract big fees and salaries. joke, joke, joke.
Firstly , you would think one of the reports these execs get for all of their products are 1) performance relative to benchmark target (simple green, amber, red rating) and 2) the margins of all their products. If they don’t know these simple facts about their products then what hope does AMP have. Secondly if they have chosen to transfer 70k members to this ERF surely there was consideration on the suitability to the customers that included fees and performance analysis. AMP should be doing everything to improve its tattered reputation. Instead they continue to act with complete disregard for their customers.
Again another scenario of AMP Execs not respecting the role and the requirements of their role. Want to see how well a firm behaves? Look at its leadership and how well they accept responsibility and accountability.
Stone the bloody crows !!!!!
Neither Mr. Wade nor Ms. Boring have any financial qualifications or advice experience. Neither are ASIC licensed persons and neither. This is who runs AMP!
Last I saw they arent providing personal financial advice.
It’s been a long time since I’ve checked. But I’m guessing the ERF invests 100% in cash and has a management fee in excess of 1% on low balances. More profits to AMP.