The boss of the wealth giant has defended the group’s decision to slash its buyer of last resort valuations, saying he “fundamentally” believes the group took the ethically and legally right course of action.
AMP chief executive Francesco De Ferrari fronted the House of Representatives standing committee on economics on Thursday, copping questions about its recent sexual harassment scandal and the group’s current recruitment of advisers to its network, after terminating multiple practices.
Committee chair and Liberal MP Tim Wilson, Liberal MP Celia Hammond and Labor MP Anne Aly all referred to emails they had received from AMP advisers, with a range of stories reporting on the impacts of the BOLR reforms.
AMP previously sold its financial planning books under the BOLR agreement for four times annual revenue, promising to buy them back for the same terms, before it cut the rate to 2.5 times annual revenue in August last year.
A collective of advisers from AMP Financial Planning filed a class action against the wealth giant in July, over losses many were said to have suffered due to the policy change. AMP is defending against the claim.
Mr Wilson commented in the economics committee proceedings he had received accounts from a number of advisers in the group, saying AMP had broken its BOLR contracts, with “no compensation and the destruction [of] their businesses and lives”.
But AMP chief executive Francesco De Ferrari defended the group, saying he was confident AMP had fulfilled its consultation obligations and the BOLR changes had passed the bar, legally.
“Legal and what may be ethically right can be different things, do you believe what you’ve done is ethically right?” Mr Wilson asked.
“I fundamentally believe so,” Mr De Ferrari responded.
“You fundamentally believe so, but do you think there’s a difference between ethics and law, what’s legally right?” Mr Wilson said.
“We’ve continually asked ourselves, do we have the right to do so and should we do so?” Mr De Ferrari said.
“…We don’t hold these practices for ourselves chair, we sell the books on to other practices. Typically we sell them over the last year at a little less than two times revenue. And so, buying them at four and selling them on at two, it was not really commercially sustainable.
“I appreciate that this is a tough choice and that’s why we are working together with our aligned practices to try to accompany them in this process, but again we’re one of the few players in the industry who offer this facility and this support.”
Mental, emotional harm is ‘unconscionable’: Liberal MP
In Thursday’s proceedings, Liberal MP Celia Hammond read an account she had received from an AMP adviser.
The person stated they had operated a financial planning business for more than two decades, with five employees – having bought into a closed market, where AMP set the price and controlled who can buy, sell and value the business. The transaction was financed through AMP Bank.
“After 21 years of service to AMP, three months after they knew they were buying my business and three months before settlement, they unilaterally changed my contract,” the recount read.
“AMP’s egregious action devalued my business by over 50 per cent. The outcome of this, instead of leaving AMP with a business valuation, AMP has put me into a position where I have to pay AMP to leave, so that AMP take the asset that I have built, at no cost to them.
“Obviously this action by AMP will obliterate my personal financial position, causing long-term harm to my family’s health and future.”
The adviser also claimed three months prior to the BOLR change rollout on 8 August 2019, AMP tried to sell additional books to him at four times the cost. Three months later, the offer was reduced to 2.5 times.
Mr De Ferrari admitted there was an issue with people who had already given their notice to sell their businesses back before the BOLR changes were implemented. He added the group was working on “finding individual solutions to each one of those cases”.
“Well I put it to you that given the feedback that all of us have received, that perhaps you need to be a little bit more proactive and a little bit quicker in contacting these advisers, because there’s many out there,” Ms Hammond said.
“Yes, you might get to them at some point in time, but the harm that’s been done to them, mentally and emotionally, if they have to wait for that, is unconscionable.”
She noted the matter was linked to the culture of the organisation.
“I implore to actually make personal contact with all of these people,” she told Mr De Ferrari.
“The fact that people do think they’ve been put out on a limb and you’re saying that you are kind of working with all of them, the fact that they’re still out there thinking they’ve been left out, is also a sign that perhaps goes back to the root of the cultural problems.”
Labor senator Deborah O’Neill has previously called for ASIC to commence an investigation into AMP’s BOLR arrangements, but the company had defended the decision, calling it “difficult but necessary”.
In July, the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) referred more than 60 BOLR-related complaints from AMP advisers to mediation.
The bank has announced the appointment of a financial services high-flyer with m...
AMP has hired the chair of leadership advocacy group Women on Boards as its n...
Aware Super (formerly known as First State Super) has indicated it spent $26 mil...