AMP has come under fire from the royal commission, accused of making as many as ten false and misleading statements relating to BOLR and ‘fees for no service’ conduct.
Appearing before the commission yesterday, AMP group executive (advice and New Zealand) Jack Regan admitted to a number of deliberate untruths made by Australia’s largest financial advice provider in previous breach reports to ASIC.
Under heavy cross-examination by counsel assisting Michael Hodge QC, Mr Regan conceded that the company misled the corporate regulator in its suggestion that fees for no service accepted from clients in the AMP “BOLR pool” were an accidental error.
"We originally thought it was an administrative oversight,” Mr Regan said. “We subsequenlty discovered it was a conscious business practice.”
Counsel assisting rejected the notion that it was a “process fail” instead suggesting it was a “deliberate decision made by AMP”, to which Mr Regan replied meekly that it was “both”.
Mr Regan also admitted that statements to ASIC that breaches did not relate to scenarios of personal financial advice.
“That was untrue, wasn’t it?,” Mr Hodge asked.
“Yes, I believe it was,” Mr Regan replied.
“Because, in fact, for at least some of these clients their service that they were paying for did include personal advice?,” Mr Hodge probed further.
“Yes,” Mr Regan said.
Mr Hodge contended that there were as many as ten false and misleading statements made by AMP in a statement to ASIC which has subsequently been tendered as evidence before the commission.
AMP chief executive Craig Meller and general counsel Brian Salter both had a role in approving the false and misleading document to ASIC, Mr Regan revealed.
The royal commission also examined AMP’s Buyer of Last Resort policy, which Mr Regan said he did “not have a detailed understanding of”.
Mr Hodge tabled an internal AMP document which indicated that under the BOLR policy an adviser would only “be paid the multiplier or indeed paid anything” for a client if it was invested in products on the AMP approved product list.
In addition, the document revealed that if a product is on the APL but not on an “AMP Financial Planning approved platform provider” then the “combination is considered not to be on the [APL]”.
“And what this appears to mean is that if a client is invested through a platform into a particular managed fund, even if the managed fund is on AMP’s approved products and services list, if the platform isn’t, then BOLR does not apply?,” Mr Hodge inquired.
“I believe that’s what it says, yes,” Mr Regan responded after a lengthy pause.
“And that means, for example, if a platinum international fund is on the approved products list but the client has been invested in that fund through Macquarie’s platform, BOLR won’t be applicable?,” Mr Hodge pressed.
“I believe that’s the case,” Mr Regan said.
“And that’s because the platforms that are available on the approved product list of AMP are primarily limited to its own brand platforms?,” Mr Hodge asked.
“As it was at that time, yes,” Mr Regan said,
“And can I suggest that creates a very strong incentive for the adviser or the planner to place the client on to a platform on the approved product list?,” Mr Hodge concluded, going straight to the conflicts of interests very rarely admitted to by vertically integrated advice providers.
In addition to the false and misleading statements, and the “very strong incentive” towards in-house product recommendation, AMP was also criticised for the “significant delay” of several years in reporting the breaches to ASIC after its lawyers advised that its conduct was unlawful.
Mr Regan’s cross-examination is currently continuing on day two of the royal commission hearings on financial advice. Follow live here: https://www.ifa.com.au/strategy/25404-royal-commission-financial-advice-hearings-live-blog
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