AMP says it will continue to stand by its vertically-integrated advice model despite the possibility of remediating a client 17 years after being charged fees for no service.
At the round seven hearings of the Hayne royal commission on Wednesday, senior counsel assisting Michael Hodge asked acting AMP chief executive Mike Wilkins whether a client coming to AMP would have confidence that AMP will stand behind its advice.
After Mr Wilkins responded in the affirmative, Mr Hodge then asked whether the case of an AMP client still in remediation 17 years after being charged fees for no service might dent the confidence of potential new clients.
“Yes, but, as I explained yesterday, at that stage I don’t think we had a full appreciation of the size of the issue that we were facing,” Mr Wilkins responded.
“In terms of the subsequent provisions that we have put forward, I think we are facing into that problem and saying we will remediate those clients within three years. And I think that AMP is actually the first of the companies with a major aligned network to be able to actually make that statement.”
“Well, that’s within three years of 1 July 2018?” Mr Hodge asked.
“Yes,” Mr Wilkins said.
“So the possible maximum period has been shortened to about… 11 or 12 years?”
Mr Wilkins noted the $460 million set aside to remediate aggrieved AMP clients for advice failures such as fees for no service.
Mr Hodge then noted it was “an extraordinary proposition” that a financial services entity of AMP’s size would withhold such an amount of money, yet clients can have confidence that, 12 to 17 years later, it would still have the capital backing to repay that money to them.
“Well, I think the clients should have confidence in a large financial institution. It might take us a while but ultimately we will do the right thing to remediate them,” Mr Wilkins said.
“It just seems like rather than having confidence that you will ultimately have the financial capacity to fix such an enormous problem, it would be preferable if it was possible to have confidence that the problem wouldn’t arise in the first place?” questioned Mr Hodge.
“I absolutely agree with you,” Mr Wilkins replied.
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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