Exclusive: Internal ASIC documents obtained by ifa reveal why the regulator chose not to pursue AMP over its mass termination of advisers and its changes to buyer of last resort (BOLR) agreements.
In July, ifa filed a freedom of information (FOI) request with ASIC pertaining to information around senator Deborah O’Neill’s request that ASIC investigate AMP’s changes to its BOLR agreements. ASIC has now released the response it sent to Ms O’Neill.
“Based on our preliminary analysis, it is apparent that the dispute about the change in BOLR multiples is essentially a commercial dispute between AMP and some of its financial advisers,” ASIC chair James Shipton said in his letter to Ms O’Neill.
“As such, we would expect the dispute to be resolved by negotiation and/or private litigation. While we will always be open minded to new information coming to light, on the basis of the information currently available to us, we believe that this matter should be resolved by private means and ASIC ought not intervene at this stage.”
ASIC said its conclusion was based on the ability of advisers to take legal action to “assert what they say are their rights”; the view that it had limited grounds to commence legal proceedings and that there would be “considerable barriers to success” if it did; that there is no direct consumer harm to be addressed; and that advisers are “financially sophisticated” and capable of making judgements about the commercial arrangements they enter into.
“Further investigation and action by ASIC would divert publicly funded resources from other work that is directed to our mandate and priorities; and in light of the above, we do not believe it is in the public interest to take this matter further,” Mr Shipton said.
Ms O’Neill also requested that ASIC look into AMP’s decision to turn off grandfathered remuneration early – a decision that ASIC said would “likely benefit consumers”.
“Please be aware that ASIC has advocated for the ending of grandfathered conflicted remuneration arrangements for some time. Accordingly, we support financial services licensees turning off their grandfathered conflicted remuneration arrangements as soon as possible and by no later than 1 January 2021,” Mr Shipton said.
“As far as ASIC is aware, AMP’s decision to end payment of grandfathered remuneration in January 2020 is legal and AMP’s actions are likely to benefit consumers through the reduction of fees and/or the rebate of fees.”
ASIC also said that AMP’s termination of advisers fell outside of its jurisdiction as it was a business decision. However, the regulator conceded that access to advice “is of concern” and that it was actively looking at ways to improve access to “affordable and high quality” advice.
“Please be assured that ASIC is monitoring the impact of AMP’s reduction of the number of its advisers,” Mr Shipton said.
“The advice industry is going through significant structural change, as large financial institutions, such as AMP, scale back or exit their financial advice businesses. At the same time, a number of financial advisers have either left, or signalled their intention to leave, the industry due to increased training requirements and increased compliance costs.”
The documents also reveal that Ms O’Neill’s request commanded substantial attention within ASIC, with several draft responses prepared and multiple meetings called to discuss the content of the letter.
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