On Wednesday, the Federal Court of Australia found in favour of advisers in the class action filed against AMP’s subsidiary, AMP Financial Planning, in 2020, in relation to the wealth giant’s controversial decision to change its Buyer of Last Resort (BOLR) scheme.
Justice Mark Moshinsky ruled in favour of the class action, finding that the changes made by AMP with immediate effect were not authorised under the legislative, economic or product (LEP) provisions and “were ineffective”.
Responding to the outcome, The Adviser Association (TAA) chief executive Neil Macdonald told ifa that the association welcomes Justice Moshinsky’s decision.
“It is the best possible outcome for our AMP members and validates our belief that when AMP changed its Buyer of Last Resort policy without proper consultation in 2019, it breached its longstanding contractual obligations to our members,” Mr Macdonald said.
In a further statement issued by TAA, Mr Macdonald added that the body “may make further comment” when it has had time to read Justice Moshinsky’s judgement in detail.
At the time the class action was filed, back in 2020, Mr Macdonald told ifa he thinks “discussing and negotiating an outcome is a more efficient and better way to do things than having to go through a legal process”.
“A lot of our members thought that too but most of them don’t feel as though they’ve been getting a good outcome from mediation,” he said.
“The longer this goes on, the more stressful it is for them, and we know a large percentage of [the mediations] are still progressing because they’re not happy with what they’ve been offered.”
On Wednesday, the court ruled that lead applicant Equity Financial Planners is entitled to damages in the sum of $813,560, while sample group member Wealthstone is entitled to damages in the sum of $115,533.51. There will be a further process to determine the impact on other group members, the court acknowledged.
In its response filed with the ASX, AMP said: “AMP acknowledges today’s decision in the Federal Court of Australia in relation to proceedings brought on behalf of advice practices authorised by AMP Financial Planning Pty Limited (AMPFP) as of 8 August 2019. The proceedings challenged the validity of some of the changes made by AMPFP to its Buyer of Last Resort (BOLR) policy in August 2019.”
“The court has today ruled in favour of the claims of the lead applicant and sample group member.”
The claim was brought by advisers who argued the wealth giant failed to give them adequate notice before writing down their client book values under BOLR contracts.
Back in 2020, a spokesperson for AMP told ifa the group was confident changes made to the BOLR contracts had followed the letter of the law as well as being “in the long-term interests of our clients and advisers”.
“The financial advice industry has transformed dramatically in the past few years, including the removal of grandfathered commissions, new mandatory education standards and higher advice standards,” the spokesperson said.
“AMP has made difficult but necessary decisions to ensure we adapt to the new environment and continue to have a strong, viable advice business for clients,” the spokesperson added. “We recognise the changes are challenging for many in our adviser network, and we’re providing support to our advisers to help them manage the transition, including those who support the class action.”
