AMP has defended its decision to change the BOLR arrangements amid demands by Labor senator Deborah O’Neill that ASIC immediately commence an investigation into the matter.
“The decision to reset AMP’s commercial terms was difficult but necessary given the recent changes to legislation following the royal commission resulting in significant economic changes and disruption across the industry,” a spokesperson for AMP told ifa. “This includes the removal of grandfathered commissions, new mandatory education standards, and new regulations around advice.
“Throughout the process AMP has consulted closely with affected advisers, the industry associations and the Small Business Ombudsman, including participating in several mediation sessions with advisers. We are providing support to advisers to help them manage the BOLR changes and make an informed decision for their future.”
The spokesperson declined to comment on whether AMP had been contacted by ASIC as part of an investigation, but said that it had participated in mediation sessions with more than 30 advice practices to date.
Ms O’Neill slammed AMP’s decision last year to reduce its BOLR guaranteed value from four times annual revenue to 2.5 times annual revenue and said that the Small Business and Family Enterprise Ombudsman had received over a hundred complaints from advisers affiliated with AMP due to the changes.
“The decision has drastically devalued the businesses of many financial advisors,” Ms O’Neill said. “This was also applied retroactively to many planners who had purchased client books in good faith with this guarantee.”
Ms O’Neill has requested that ASIC prepare a full report for the joint committee on corporations and financial services oversight hearings on 13 July.
AMP now scurrying and pretty soon they wont exist. Of course, management will get golden handshakes for a job well done while shareholders, customers and ripped of financial adviser bear the cost of years of appalling management
Have gotta laugh at the self proclaimed gurus that argue that the 4 times multiple was above market. So can you go to a property auction and jump up and down and say that price is wrong because it is too high a multiple of the average wage ? The price is what it is. If the AMP product was twice as expensive as an alternative product could imply that the 4 times multiple was actually below market value as it retained the profit with AMP.
Total C**ts.
You threw your loyal planners under a bus.
I understand there were contracts signed etc and do very genuinely feel sorry for the blind side and angst this has caused but moving forward please change your mindset on the valuation of your business.
If you believe a ‘fair valuation’ is any multiple of recurring revenue, you are going to be disappointed many, many times in the future – this will not be a one off.
Change your mindset to a Net Profit After Tax (NPAT) outlook, this is a fairer way to value a company.
A business can have very high revenue but also be completely inefficient with its costings resulting with a low NPAT, but under a recurring revenue multiple will have the perceived market value will be really high for a business inefficiently run.
As opposed to a business with lower revenue, run extremely efficiently with a much higher NPAT, surely that’s the business that should be valued higher? Even with a lower recurring revenue….
bear in mind a number of AMP advisers bought in at the inflated rate as well
The price was set by AMP, they were the market maker. Talking about 4x as being “inflated” is a moot point. AMP made the market at that price and had willing buyer and sellers at that price, facilitated by their market making and their provision of lending. So no AMP adviser is at fault for participating in that market. AMP simply, and unilaterally pulled out and changed the terms of the agreement…without compensation to those whose wealth had been confiscated. You wouldn’t accept this type of behaviour in any other setting…you shouldn’t here.
The 4X was never commercial. and all about keeping advisers and corporate FUM. And so many AMP advisers gamed the multiple. Sure the reduction to 2.5X is going to be difficult for some but in the commercial world these things happen. The advisers knew they were on a gravy train and the smarter ones knew that it couldn’t last forever.
I wonder how many people have died pre-maturely because they were associated with AMP ?
A smart operator would have let the loss of Grandfathering flow through to the ultimate BOLR value, hence saving AMP a bucketload even before they review and invent remediation issues! Sadly, no smart operators in there!
They aren’t paying anything for grandfathered clients. They wrote two pages on how it was a sliding scale and then wrote a sentence at the end saying that none of the above applied. AMP at its finest — look good and then throw in a line which means the rest of it means nothing. This however is why their argument for amending the 4 times due to grand fathering isn’t logical but AMP don’t seem to care about logic or fairness
Lies, Lies and more LIes, unless consultation means telling people what you are doing. Working with planners, lie, they keep pushing their own agenda and are not moving or negotiable. The foundation of BOLR was the instituional ownership of the clients and how this tied the advisers to AMPFP, which is why a BOLR arrangement was in place with a premium attached. AMP have the ability to be reasonable, remove institutional ownership with the reduced multiple, reduce outstanding debt based on the new valuations. Follow up on the many questions planners have about the offers and the contracts. Silence is deafening from AMPFP. They are only working on the bottom line and anything that gets in the way is swept aside and damn the consequences. A very unethical business.
“Throughout the process AMP has consulted closely with affected advisers, the industry associations and the Small Business Ombudsman” A little bit like me telling my wife that I am going out for a drink after work on Friday, then coming home shattered on Sunday afternoon! Then saying ” I don’t understand why you’re so angry dear, I did “consult” with you lol
Wasn’t the whole AMP RC issue commenced as a result of the perception of trying preserving BOLR.
Pretty sure the planners are still getting the same revenues as before.
Maybe try the real world and build and sell business on its merits and not have an easy out clause
From the comfort and safety of a wages role comes this comment
The contracts stipulate you can’t sell the business to whomever you want, you must sell it back to AMP, so therefore a multiple was put in place.
Contracts were signed, all parties agreed. AMP then change the goal posts as they see fit…to hell with the consequences. Many a live lost, homes repossessed due to the requirement of the personal guarantees that AMP bank needed. So we have one linked party changing values, yet enforcing debts from their own lending arm that they lent against using the agreed multiple. It’s so far from a level playing field it’s not funny.
Why didn’t AMP pay out the 1.5 times – I forgot AMP is all about themselves – no regard for the welfare of their advisers!
working closely…. Is that why the internal AMP planner association was blindsided by the decision?
Funny how all of AMP’s difficult decisions effect only others not them.
Mediation my back side…
Let’s hope the report covers that too…
The bizarre issue is why would Deborah O’Neill be getting involved in this anyway? Labor has shown time and again they regard financial advisers as the enemy. And Commissioner Hayne explicitly called out BOLR arrangements as not being in consumers’ interests.
O’Neill has said she will raise this in a Senate committee she is on. That Senate committee is supposed to be looking at a wide range of financial issues, including the unintended consequences of over regulation. Andrew Bragg is on the committee so it will probably also delve into the dodgy behaviour of union funds, which Hayne chose to ignore.
One suspects O’Neill’s true motivation with the AMP BOLR issue is to sidetrack the Senate committee and its associated media coverage onto yet another AMP bashing, in order to avoid scrutiny of financial advice overregulation and the regulatory free pass given to union funds.
Who cares what Hayne thinks? He is a cluelsess on the industry as anyone I have heard. How can BOLR not be in the clients best interests, AMP buy the clients back and sell them to a new adviser so that they can be serviced. Would you prefer the adviser just goes bankrupt and leaves the client in the wilderness?
The Labor Party cares what Hayne thinks. The media cares what Hayne thinks. Which is why a Labor politician supposedly defending financial adviser BOLR entitlements is awfully suspicious. It reeks of a hidden agenda.
what do you mean by “unintended consequences of over regulation” Over regulation by its very definition is a consequence, more over any one with even a modicum of intelligence and industry experience saw this coming from a long way off. political expediency is the clue to this disastrous so called set of reforms.
sold loans at 4x with a guarantee they can be sold back to them at 4x… then told them its not worth that anymore, AMP also holds most of the loans these advisers still paying back they have not taken off what is on the loans they sold onto them, they then screw the adviser down to pay them sell with audit
BOLR was never a “guarantee” that you could sell back what you bought if you change your mind or can’t hack it. BOLR is a mechanism for retiring advisers to sell their successful business. It is not a safety net for failed business investment. People who are unwilling to accept business risks should remain employees.
Spoken like someone who has no idea. The contract was changed by AMP. I hope for your sake that you never have the carpet pulled from underneath you. But wait, perhaps you are far too smart to let something like this ever happen to you? To suggest that ALL the planners affected have failed in their businesses and that these changes had nothing to do with it, shows your lack of understanding about the whole situation.
Then why do AMP FP provide “valuations” based on BOLR values? Why to AMP Bank issue loans based on a BOLR “valuation” ?
When I had a interview with a bdm that was not what I was told. It was more you get more bolr if you write amp business. 4 times compared to 2.5 times for non amp products. So it was suggested transfer all clients from another provider, charge upfont fees, then rest easy…. you get your 4 times back. Top business play hey. It was explained the book could be sold back at anytime. So this ” just for successful planners retiring ” is way out of whack in terms of whst your bdms were promising!
This is exactly the sort of thing Hayne was concerned about in relation to BOLR. It is clearly not in consumers’ interests. To AMP’s credit, they are getting rid of that model. It is hard to support anyone who signed up to that model and is lobbying to retain it. It beggars belief that an ALP politician would be supporting its retention.
This is incorrect, AMP were paying 4 times for AMP and non AMP products. You could however buy an external book for 2.5 times or 3 times , sign over institutional ownership of the clients as well as a host of other clauses favourable to AMP and in effect when you sold back to AMP down the track and retired receive 4 times. I dont believe this to be common practice or make up the vast majority of transactions that have taken place at AMP in regards to BOLR.
You are an idiot.
That is exactly what it was. It was a contractual guarantee to buy back clients at a pre-determined multiple (regardless of prevailing market price or conditions). If you found your own clients, or bought them from AMP at 4x, and decided to retire, or “changed your mind” and decided you wanted to change career or whatever the reason, AMP signed an agreement with you to pay you 4x (and lent you the money at that multiple).
AMP advisers designed their and their families lives around that guarantee. They accepted branding and operational restrictions because of that guarantee. 4x was always above the prevailing market price and that was a price that AMP was happy to pay. Just because market values fell more than expected, there is neither a legal nor moral justification for what AMP did.
AMP stole from their advisers. they stole real money and they stole peace of mind.
It is the greatest institutional theft of wealth from a network of small businesses in Australian corporate history. t happened in the open but has largely gone unnoticed, or more accurately “un-cared for” because those that were stolen from have been demonized to a lesser class of citizen (thank you Kenneth Hayne and the general media).
So, I will end with where I started…you are an idiot.
Did AMP also guarantee to give your money back if the clients didn’t like your charming manner and decided to cancel?
Did AMP also guarantee to give your money back if a competitor came along and made your clients a better product or service offer?
Did AMP also guarantee to give your money back if the clients decided they wanted to deal with a non aligned adviser rather than one licensed by AMP?
If you seriously believe you signed up to a “business opportunity with unlimited earning potential and a money back guarantee”, then I have some slow racehorses you may also be quite interested in purchasing.
It would be 4x what the books worth when you sell it , course its not guaranteed clients would stay where did you get that from? I would much rather have a racehorse than amp shares just quietly.
You have absolutely no idea.