AMP has announced it will expedite remediation of aggrieved financial advice clients, carving $290 million off its overall net profit.
The embattled financial institution has announced today that expected underlying profit for the financial year 2017-18 to be in the range of $490-500 million, stemming from what the company says in resilient growth in its core businesses.
A statement to the ASX reveals that the “net profit attributable to shareholders is expected to include a provision of $290 million (post-tax) for potential advice remediation”, following a decision to “accelerate” the process for compensating victims of dodgy advice.
ifa understands that the advice remediation figure will affect the company’s overall net profit and will be paid from AMP’s capital surplus, which the statement describes as “solid”.
The statement also announces fee reductions for its MySuper products, which will impact 700,000 customers.
AMP acting chief executive Mike Wilkins said the acceleration of the remediation process is evidence the company is taking the charges and criticism levelled against it seriously.
“Customer needs are our immediate priority, as we firmly believe this will also best serve the long-term interests of shareholders,” Mr Wilkins explained.
“We know it will take time to earn back trust, however today is an important milestone in that process.”
The remediation process is “complex”, he said, as it will pertain to both employed advisers and those within AMP’s expansive (if declining) network of self-employed authorised representatives.
In addition to the payouts to aggrieved customers, the remediation program itself is expected to cost the company $50 million per annum over the next three years as an incurred expense, with Mr Wilkins explaining that AMP will embark on a number of unspecified “recovery options” to offset the remediation costs in the medium term.
AMP is facing criminal charges at the royal commission for potential contraventions of the ASIC Act and Corporations Act, accused of providing false and misleading testimony to the corporate regulator and harbouring a culture that prioritised in-house product revenue over the best interests of customers.
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