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.
Only problem is that this revenue was sold. And was sold at 4x. AMP got their money and government got their taxes.
No problem with AMP switching off fees early to benefit consumers. Just continue to pay the contract until it is actually time to switch it off.
Why is it always small business and planners that pick up the tab?
If ASIC really believes that AMP’s decision to turn off grandfathered remuneration early would “likely benefit consumers” then ASIC is doctrinaire, dopy and out-of-touch with reality. Perhaps ASIC believes that middlemen have no value and should be eliminated. The real facts are that the market has shrunk. A large body of consumers is now without assistance in the market. The market is still complicated for naive clients, but ASIC pretends that by destroying businesses ASIC builds an industry. “We had to destroy the village in order to save it.”
ASIC sure do seem to spend a lot of time running interference for AMP. Their lack of action on AMP following the Royal Commission is surely evidence of this.
If only ASIC pursued the big players with the same amount of gusto they use in pursuing minnows the industry would be a better place for consumers.
Hmmmm! Attention ASIC, you administer the Corporations Act within which is a major provision that corporate officers must not allow the relevant entity to “trade whilst insolvent”. Mr Ferrari has announced a unilateral change to the terms of an existing contract on the basis that the price implicit in that contract is unsustainable, that is “AMP cannot meet its obligations as and when they fall due”, therefore they are technically insolvent. ASIC remains so “deeply asleep at the wheel” they are a laughing matter. They refuse to take on any large institution because those institutions can afford the barristers to run rings around the petty bureaucrats. It is much easier to look busy “kicking the s**t out of small businesses”, aka advisers “the new scapegoats of the empire”.
This is one issue that ASIC has got right. It is a commercial matter between AMP and its planners. It’s not within their mandate.
However protecting consumers from bad and illegal advice by union funds and accountants is within their mandate. It is outrageously biased that they refuse to do anything in these areas, and focus all their resources on persecuting licensed advisers.
Correct decision by ASIC – its a commercial argument. I’m looking forward to the class action hitting court. AMP isn’t going to lose it and there are going to be some very embarrassed advisers and the case is going to expose some characteristics about SOME advisers that will not be well received by the public – laziness and lack of commercial skills for a start. BOLR created a greed culture which harboured SOME questionable practices and SOME ( foolish ) advisers assumed it was a capital guaranteed bubble. The very smart AMP advisers who worked the BOLR process have made a lot of money from it and will be keeping their heads low because reducing the multiple is just a speed hump for them.
you clearly have no idea, no ethics and no empathy…must feel good being you.
Interesting comment. I think you might be onto something here. I think when some AMP financial planning clients get an understanding on how illiterate some of their advisers are concerning the running of their own businesses, they will want to head to a financial planner with a better business model and understanding for advice.
How could any of that be surprising – quite logical really, why would they think ASIC (ASIO) would stick up for them?
Nothing in there about how ASIC’s remit is to aid Industry Super Funds wherever possible and how this presented another wonderful opportunity to smash another couple of hundred advisers? Interesting that dealings between AMP and its advisers are considered to be commercial agreements, but dealings between advisers and clients arent.
Might be the Fact ASIC changed the rules and banned grandfathered Trail Commissions.
Thus forcing AMP to change BOLR.
ASIC would thus have to investigate and blame themselves.
And that ain’t going to happen.
It would be very interesting to understand of the practices terminated whether fee paying clients have had their fees switched off immediately by AMP. Similarly, what happened to any commissions in the same instance?
Has ASIC actually checked if the removal of grandfathered commissions has actually resulted in a fee reduction to the clients? Are they going to trust AMP to do the right thing? Or is it going to be exactly what happened with the reduction in insurance commissions which were going to be handed back to clients as cheaper premiums. How is that working out? Yet again a bunch of corrupt politicians and career public servants patting themselves on the back when if fact they have done absolutely nothing to help clients, in fact they have made it much worse.
“advisers are “financially sophisticated” and capable of making judgements about the commercial arrangements they enter into”
It is heartening to know that this is ASIC’s opinion.
I have seen the contract one of the large firms asked their advisers to sign. The contract was crazy – they could take away your clients for any transgression of any kind from any member of staff. When I asked whether they ever had their contract queried by advisers who joined, the answer was ‘no’. That particular organisation has improved their contract but afaik AMP’s contracts were the same and I cannot fathom why any financially sophisticated person would ever sign such a contract.
So ASIC maintain that turning off grandfathered commissions will benefit consumers through reduced fees but are content to allow the continued payment of Intra-Fund advice fees charged to every single member of a super fund regardless of whether they access or receive advice or not.
Turning off grandfathered commissions may reduce the fees by .40, .50 or .60 %, but if the client continues to receive advice they will either be paying the equivalent fee structure or significantly more in advice costs.
So, where is the consumer benefit unless ASIC are hoping that consumers will then move to an Industry Fund because of the perception of low fees but pay for mandatory advice costs they do not receive.
The promotion of the abolition of grandfathered commissions by ASIC and their unwavering support of any institution who has turned them off 6-12 months prior to when they were forced to do so is disgusting.
They openly promote and encourage the turning off this remuneration prior to regulation requiring it and then put their hands in the air and say that it has nothing to do with them if a provider makes that decision.
It is a disgrace and is driven by an agenda by ASIC as per their rushed and incomplete submission regarding grandfathered commissions to the Royal Commission.
The reason why providers have turned off grandfathered commissions early is two fold.
The first is that they are all untrustworthy when it comes to adviser relationships and second, ASIC have governed them by fear and retribution since the RC.
This is a regulatory mess created by complete over reach and ideological agenda and a regulator that is hell bent on destroying the independent financial adviser space in favour of channeling as much money toward Industry Super as possible.
The reason for turning off grandfathered revenue was a negotiation. Providers agreed to give ASIC what they wanted in exchange for some benefit to product providers – It is only the adviser that is impacted here.
Sounds fair. Good exclusive there ifa, interesting read.
ASIC don’t seem to care about the health of the finance industry, and in particular participants being Financial Planners. I guess that is because historically planners are linked to a product manufacturer. Planners really should be the gate keepers between products and clients and ASIC is just saying they can look after themselves. I’m not an AMP planner and I don’t even like AMP, in principle I even agree with their actions here, why indeed pursue it, but it’s obvious ASIC role is very much one sided and I’m disappointed by their heartless comments.
“it was actively looking at ways to improve access to “affordable and high quality” advice.” How could this be the case ?
Actively increasing BS REGS, Red Tape and Advice costs. At the same time stating they want more Affordable Advice.
DOESN’T make any sense does it ASIC.