Almost four years ago, on 8 August 2019, AMP announced 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.
Its grandfather revenue plan was also changed from four times to 1.42 times, with a further plan to continue reducing the figure per month until it reached zero by January 2021.
Just over a year earlier, AMP Financial Planning’s (AMPFP) then-managing director met with AMP practices around Australia to reassure them that prevailing BOLR terms would remain the same.
Given this reassurance, numerous practices are presumed to have chosen to remain with AMP instead of exercising their BOLR rights in 2018.
Once regarded with reverence by the industry, these BOLR rights provided exiting advisers with the prospect of unburdening their client books for substantial sums, seemingly capable of supporting a comfortable retirement.
The inherent issue with the BOLR agreement was its provision of complete market control to the institution. AMP, as the owner of the clients, held the authority to determine the price, effectively deciding the value of an adviser’s business. Moreover, the adviser’s business served primarily as a means of promoting the wealth manager’s various tools and offerings — a point reinforced by the royal commission.
However, the year 2019 brought not only financial hardships but also inflicted a substantial mental burden upon the advisers.
At the time changes to the contractual relationship between AMPFP and the financial planning practices in its network were made, the network consisted of 542 practices.
In addition to contradicting its earlier assurance by implementing this change, AMP also faced allegations in 2020 of weaponising the BOLR audit process.
At the time, the head of AMP’s financial planner association, Neil Macdonald, said the wealth giant was not allowing a proper appeals process for advisers failing exit audits that could cost them millions of dollars in business values and potentially deem them ineligible for the class action.
The terms of advisers’ BOLR contracts meant AMP reserved the right to pay nothing for an adviser’s client book in some circumstances where a high percentage of their client files had failed an exit audit.
When confronted with inquiries about the hardships experienced by advisers, AMP’s chief executive officer Francesco De Ferrari asserted to the House of Representatives standing committee on economics that the actions taken by AMP were not only legally justified but also ethically sound.
On many occasions, Mr De Ferrari and the AMP team cited the royal commission and the resulting significant economic changes and disruptions across the industry as drivers for the giant’s “necessary” changes.
They argued that the original BOLR agreement was not financially viable and required revision.
The extent of the suffering inflicted upon advisers by these changes is truly distressing. Numerous advisers, in interviews with ifa, revealed they had contemplated self-harm during that period. Many of them harboured feelings of self-blame for their decision to join the company and for placing their trust in AMP’s promises.
Expressions of relief, brought on by Wednesday’s verdict, inundated ifa’s comments section this week, emphasising the profound significance of the decision.
“Great outcome, and nearly the end of the nightmare, which has hopefully saved a number of planners’ lives,” one reader said.
“I’m grateful that justice has prevailed,” another added.
While a third said: “How great is the decision, we paid lots of money to buy books from AMP, now at least we might get some money back”.
The battle, however, may not be over just yet, with AMP yet to confirm whether it intends to appeal the court’s decision.
Rightly so, some advisers remain sceptical, fearing another prolonged legal process.
“AMP executives like many other major institutional businesses houses just recklessly ruined the lives of many advisers. While the decision is positive, it will never heal the pain caused to many. If AMP as a company and those that control it have any decency, they should finalise this matter as soon as possible so that shattered lives can start the step of trying to heal,” one reader said.
Another aptly added: “Great outcome, and nearly the end of the nightmare, which has hopefully saved a number of planners lives. Planners who had been financially destroyed and were struggling to find a way out. Remember, if you are struggling mentally reach out and ask for help or contact Beyond Blue or Lifeline”.
Together with the advice community, ifa supports a prompt resolution to the matter and justice for the wronged advisers.
If you are suffering from depression, anxiety or suicidal thoughts, or you’re worried about someone else and feel that urgent professional support is needed, contact your local doctor or one of the 24/7 crisis agencies below:
Beyond Blue: 1300 22 4636 https://www.beyondblue.org.au/
Lifeline: 13 11 14 https://www.lifeline.org.au/
Suicide Call Back Service: 1300 659 467 www.suicidecallbackservice.org.au
Well said Maja!