AMP admits that a number of its advisers didn’t understand they needed to provide services in exchange for fees after switching to a fee-for-service model.
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.
Adrian Flores is a deputy editor at Momentum Media, focusing mainly on banking, wealth management and financial services. He has also written for Public Accountant, Accountants Daily and The CEO Magazine.
You can contact him on [email protected].
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