Appearing before the commission yesterday, AMP group executive (advice and New Zealand) Jack Regan admitted to a number of deliberate untruths made by Australia’s largest financial advice provider in previous breach reports to ASIC.
Under heavy cross-examination by counsel assisting Michael Hodge QC, Mr Regan conceded that the company misled the corporate regulator in its suggestion that fees for no service accepted from clients in the AMP “BOLR pool” were an accidental error.
“We originally thought it was an administrative oversight,” Mr Regan said. “We subsequenlty discovered it was a conscious business practice.”
Counsel assisting rejected the notion that it was a “process fail” instead suggesting it was a “deliberate decision made by AMP”, to which Mr Regan replied meekly that it was “both”.
Mr Regan also admitted that statements to ASIC that breaches did not relate to scenarios of personal financial advice.
“That was untrue, wasn’t it?,” Mr Hodge asked.
“Yes, I believe it was,” Mr Regan replied.
“Because, in fact, for at least some of these clients their service that they were paying for did include personal advice?,” Mr Hodge probed further.
“Yes,” Mr Regan said.
Mr Hodge contended that there were as many as ten false and misleading statements made by AMP in a statement to ASIC which has subsequently been tendered as evidence before the commission.
AMP chief executive Craig Meller and general counsel Brian Salter both had a role in approving the false and misleading document to ASIC, Mr Regan revealed.
The royal commission also examined AMP’s Buyer of Last Resort policy, which Mr Regan said he did “not have a detailed understanding of”.
Mr Hodge tabled an internal AMP document which indicated that under the BOLR policy an adviser would only “be paid the multiplier or indeed paid anything” for a client if it was invested in products on the AMP approved product list.
In addition, the document revealed that if a product is on the APL but not on an “AMP Financial Planning approved platform provider” then the “combination is considered not to be on the [APL]”.
“And what this appears to mean is that if a client is invested through a platform into a particular managed fund, even if the managed fund is on AMP’s approved products and services list, if the platform isn’t, then BOLR does not apply?,” Mr Hodge inquired.
“I believe that’s what it says, yes,” Mr Regan responded after a lengthy pause.
“And that means, for example, if a platinum international fund is on the approved products list but the client has been invested in that fund through Macquarie’s platform, BOLR won’t be applicable?,” Mr Hodge pressed.
“I believe that’s the case,” Mr Regan said.
“And that’s because the platforms that are available on the approved product list of AMP are primarily limited to its own brand platforms?,” Mr Hodge asked.
“As it was at that time, yes,” Mr Regan said,
“And can I suggest that creates a very strong incentive for the adviser or the planner to place the client on to a platform on the approved product list?,” Mr Hodge concluded, going straight to the conflicts of interests very rarely admitted to by vertically integrated advice providers.
In addition to the false and misleading statements, and the “very strong incentive” towards in-house product recommendation, AMP was also criticised for the “significant delay” of several years in reporting the breaches to ASIC after its lawyers advised that its conduct was unlawful.
Mr Regan’s cross-examination is currently continuing on day two of the royal commission hearings on financial advice. Follow live here: https://www.ifa.com.au/strategy/25404-royal-commission-financial-advice-hearings-live-blog
I have worked in big and small and can tell you the small boutique firms are just as bad charging large percentage based fees and zero contact with client for years. AMP stink though.
Agreed, I think it comes down to whether a place has bought a grandfathered book of clients. They don’t want to turn that gravy train off and actually need to service them so clients are stuck paying big $$ for crap products and no service.
Wonder if they will be as vehement with the ISA’s First State, if they even get called up that is
AMPFP’s client ownership terms are not reasonable for advisers that want to leave AMPFP and work elsewhere. But their BOLR terms for advisers who stay with AMPFP until retirement are not commercially viable for AMP. The whole system is unsustainable. No surprise that execs are doing dodgy things to try and prop it up.
Between looming FASEA deadlines, and now the Royal Commission fallout, AMPFP should expect a lot of early retirements and a run on BOLR. Glad I’m not an AMP shareholder.
While there is some morbid satisfaction in watching senior management being held to account, I can’t see any good publicity for our industry coming from these hearings. As we all know, these are practices that have been common from Life Offices and Fund Managers from day dot, so it’s little wonder that the industry has been subject to some controversy over the years. As they say, the fish always rots from the head.
I might be reading the live feed incorrectly, but it appears that is implied that post FOFA rules should be applying for business written pre 2013, I’m not sure whether that’s fair.
I wonder if the powers that be are wondering whether putting their faith in these morally challenged organisations to basically draft the legislation for this industry going forward (and I’m specifically thinking the LIF Reforms here) was the wisest thing to do.
Just ordinary. The tide has gone out and AMP have been exposed. We all smell bullshit here…
All these findings coming out from the RC about vertical integration, BOLR and fees for no advice are well known by ASIC, FPA, AFA and everyone in the industry. The reason this has been allowed to go on and will continue to go on, is that the Big Banks and Product Companies have always had the advice profession captured. They have been able to this with their political and financial power. It’s capitalism and these big businesses that run our country; not the government. This will all get washed away in the senate or kicked further down the street or re-engineered to suit the big end of town, who have all the power; like it always has and will continue to do so…unless the world decides that capitalism is no good anymore?… I don’t think so! We all know this wrong! but it is just the way the world works and how the majority of human beings treat each other. Rich or Smart people get all the money, so Poor or Dumb people lose all their money.
The answer is simple. All conflicts regardless must be avoided. This BOLR nonsense so that if an adviser uses a platinum propduct NOT on the AMP list of AMP porducts, then a conflict exists is something these vertical model fools have been doing for a long time. The conflicts exists as long as government allows this to occur. The regulators who helped create this nonsense, again with yes wide SHUT are discovering that there is a problem agter their lack of vision and intelligence created the problem. We will only be a profession if the conflicts were removed and that means product manufacturers need to compete for business by having the products advisers can use in the clients best interest. AFSL’s are or should be made history. Individual licenses to advisers only. This occurs in the Medical, Legal, Accounting, Tax profession. So get ready IFA’s a new day for the industry should dawn on us and our clients. Will self interest by product manufacturers and their salesforce masquerading as advisers get in the way ? Oh and then there’s the pollies and their favorites, Banks, Life Offices and the INdustry Funds. As for the consumer, who will win their hearts and minds and get a share of the spending wallet ? Lets see.
This is cringe worthy to watch. Mr Hodge is being polite to Regan so far but he’s got to lose his bottle with him soon. If I was the commissioner I would stop the proceedings now and have AMP send in someone who knows something about what is, and has, gone on.
I agree, I’m surprised they didn’t send him home yesterday and call for another more reliable witness. Let’s hope the rest of the execs to come are better prepared as it’s certainly not a good look so far.
He couldn’t even explain what he was apologizing for in his own email!
It’s like Regan answered a “Scapegoat Wanted” job ad on Gumtree.
Not a bad job though. According to the annual report he earned $3M last year! Based on his performance at the RC and the problems that have been exposed one must question if AMP rewards for performance and capability.
i think the new BOLR terms treats all revenue equally, regardless of platform or insurer.
You are correct, the new BOLR terms for AMP pay BOLR for all products including non APSL products
Reagan is not doing AMP any favours is he. In no way is he coming across as a person who is on top of his portfolio. He couldn’t be paying this dumb so it perhaps it’s AMP’s strategy not to put anyone who knows what is really happening in front of the RC. This is outstandingly embarrassing to AMP and our industry.
I’m just left with one question: What ( or who ) is AMP trying to cover up?
Lets hope the RC extends to other licencees as it was a common practice in these type of organisations even the Credit Unions some of which sold out of Financial Planning to cover the issue.
But not all licensees have BOLR.
BOLR is the issue here, the problem is charging fees whilst the clients are orphans.