EXCLUSIVE A growing number of AMP advisers could be forced to sell their homes to pay back business loans to AMP Bank, which has refused to negotiate on terms.
Following AMP’s decision to reduce BOLR arrangements from 4x to 2.5x for fee paying clients and a multiple that would be worth close to zero on grandfathered fees, ifa revealed that AMP advisers received termination letters from the company. These letters offered advisers the following options:
1. Exercise BOLR rights under the new reduced valuation;
2. Take up AMP’s ‘one-off’ offer;
3. Secure appointment as an authorised representative of another AFSL and apply to AMPFP for the release of client institutional ownership terms; or
4. Join or merge with another AMP practice or sell client register rights to another AMP practice.
Advisers also have the option of taking no action, in which case AMP will cancel the AR status of the planner and take back their clients, with any loans remaining payable to AMP Bank.
AMP’s ‘one off’ offer is effectively the same as BOLR with a strict confidentiality clause that states:
“The practice and the practice principal must keep confidential all information about the one-off offer, the settlement agreement and the exit terms and must not disclose, nor allow a third party to disclose, to any person such information unless such disclosure is approved by AMPFP, required by law or to legal or accounting advisers on a needs to know basis.”
AMP advisers must choose one of these options by the end of the month (31 October 2019). But planners have revealed that when they ask the company what their business is worth, they are told that "unfortunately exact valuations are not available".
AMP planners who spoke to ifa did not wish to be named, but expressed their frustration that AMPFP has changed the definition of 'grandfathered clients' three times this year. They claim AMP is using grandfathered revenue to further devalue their businesses.
AMP advisers are fearful to go on the record for fear of retribution or a further devaluation of their business. But ifa has spoken to several AMP planners over recent weeks and discovered that they are now preparing to sell their homes to pay back loans from AMP Bank used to fund the acquisition of client registers.
Last month ifa asked AMP wealth boss Alex Wade if AMP Bank would consider reducing the loan balances for advisers, given that it was the group’s decision to devalue the assets.
“That is an individual discussion that we are having with each individual practice and the bank,” Mr Wade said. “Fortunately, or unfortunately, there is no one-size-fits-all. Each practice and each circumstance is very different, which is why it is a pretty big task.”
But AMP advisers say the group is providing no support or individual negotiations at all. Many have told ifa that they are in significant financial stress and the pressure of not knowing where they stand on the matter is having an impact on their health and personal relationships.
Planners issued with a termination letter told ifa they are now unable to write any new business as they cannot consciously take on a client knowing full well that they will be terminated by the end of the month. Meanwhile, any requests for relief of their loan repayments to AMP Bank are denied. Advisers continue to pay a licensing fee of up to 23 per cent.
Email correspondence seen by ifa shows the nature of the conversations between practice principals and AMP Bank representatives. One email stressed that the adviser was to repay “all monies” borrowed and suggested they “seek legal advice”.
The emails show AMP Bank has requested advisers “work with AMPFP to get the full value of the asset”. But after contacting their AMPFP BDM, advisers are being told to deal directly with the bank.
With no clear answers from AMP Bank or AMPFP, advisers are growing increasingly concerned about their financial future as the 31 October deadline set by AMP draws nearer.
A number of AMP advisers told ifa that they will be forced to sell their family home to repay their debts. They also confirmed that they have been instructed not to tell their clients about their termination. Instead, AMP has provided them with a template letter to send to their clients before they move on.
The only hope for many advisers is the AMP Financial Planners Association, which is preparing a legal case against the embattled wealth manager. Association CEO Neil Macdonald confirmed to ifa that he has spoken to a number of funders who have expressed strong interest at ‘competitive terms’ and said that ampfpa is in the process of finalising the lawsuit.
If you have any information about the impact of AMP's BOLR changes on advisers and their clients, please contact ifa editor James Mitchell at [email protected]
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