Michael Guggenheimer
AMP Financial Planning (AMPFP) will undertake a two-step revamp process of its Buyer of Last Resort (BoLR) offer, in a move the financial services giant hopes will eliminate real and perceived conflicts of interest within its offering.
In an internal message to its planners, obtained by MoneyManagement, AMPFP said the two-step process would include the introduction of tactical, short-term changes to its BoLR offering that will significantly reduce potential conflicts of interest, as well as a firm commitment to developing a long term, strategic BoLR solution that will eliminate all real or perceived conflicts of interest over time.
The message also said effective July 1 this year, the group would increase the BoLR product multiples for non-AMP retail products so there is no difference in how AMPFP values retail products under its current BoLR offering. The financial services group was quick to state though that any major changes to its BoLR arrangements would require extensive input and consultation from various stakeholders before such changes were set in stone.
“We are committed to developing a long-term, strategic BoLR solution that will address any real or perceived conflicts or, where appropriate, ensure they are transparent and disclosed. We are engaging in a two-step process to achieve this objective,” AMPFP managing director Michael Guggenheimer said.
“In the first step, AMPFP will align the BoLR product multiples within each product grouping for all retail products on our approved products and services list. In practice, this means we will be increasing the BoLR multiples for non-AMP retail products so that there is no difference in how we value retail products under our current BoLR offering.
“The second, longer-term step is to introduce a new valuation methodology that reflects the value of planners’ businesses,” he said.
Guggenheimer said the Financial Planning Association’s ‘Principles to Manage Conflicts of Interest’ paper was a consideration when structuring the changes, though he said AMPFP regularly reviews its offer to make sure it remains current.
He was adamant the changes were not in response to AMPFP’s enforceable undertaking by the Australian Securities and Investments Commission (ASIC) last year.
“AMPFP regularly reviews its offering to make sure it remains contemporary, compliant and relevant to planner practices.
“BoLR remains an important facility for planners, but our experience shows most sales remain planner to planner — last year BoLR was only required five or six times. BoLR can be useful in unexpected situations, such as when a planner falls ill. The changes announced apply to all situations and with no grandfathering provisions,” he said.
Asked if AMPFP had been given any feedback from its planners regarding BoLR changes, Guggenheimer said the proposed changes would indeed benefit planners.
“It’s early days yet, but it’s worth noting that planner-to-planner sales remain the most common. BoLR provides planners with an important facility in those unexpected situations where they are unable to find another planner to buy their practice, for example if they fall ill.
“The effect of the changes announced is an enhancement to the BoLR valuation. Planners will potentially be better off under the new BoLR entitlements, as we are increasing the BoLR product multiples for non-AMP retail products to the same multiple as AMP retail products,” Guggenheimer said.
In July last year, ASIC accepted a legally binding commitment from AMPFP to modify key aspects of how it provides financial advice to its customers. The enforceable undertaking offered to the regulator by AMPFP follows an extensive surveillance of its operations by ASIC between October 1, 2005, and April 12, 2006. During this period, ASIC reviewed 300 files selected from 30 AMP planners chosen at random.
