AMP accused of inducing planners into debt

12 August 2019

AMP is in breach of its contractual obligations to its own planners because it has not given them sufficient notice of its changes to buyer of last resort and other arrangements, according to the AMP Financial Planners Association (AMP-FPA).

Because of this, the AMP FPA has declared it will be contesting the significant changes announced by AMP last week including the BOLR changes and moves which are likely to see the departure of a large number of advisers.

The Association has signalled that it will be arguing that large numbers of advisers had been induced into debt by AMP to buy books of clients from exiting AMP advisers at four times recurring revenue and that that debt had been funded by AMP Bank.

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AMP-FPA chief executive, Neil Macdonald, said that the company was obliged to consult with the association over changes to the terms of BOLR arrangements and to also give members of the association 13 months’ notice of any change that would have a detrimental effect.

“AMP has done neither,” Macdonald said.

He also claimed that AMP’s pinning of BOLR to what it claims is a market value of 2.5 per cent is disingenuous because it ignores past practice and precedent.

“Advisers had to pay four times recurring revenue to buy into the right to service an AMP client book.  That was the price set by AMP. It was never a market value. The adviser did not own the client book or any goodwill and would never have paid four times without AMP’s promise to pay four times when the adviser retired from the industry,” Macdonald said.

“This was AMP’s mechanism to attract and retain advisers long term. But now, AMP is wanting to keep the four times entry price for itself and only pay back 2.5 times.
“AMP has already broken trust with its own customers and it has now broken trust with its own people,” he said. “The reduction of the multiple applied under the BOLR terms is potentially disastrous to many advisers, particularly those who have given notice but have not yet been bought out.”

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AMP is a pathetic organisation and the fact they believe that destroying their loyal planners is perfectly fine is just not right. How can this be right by any moral standard?

AMP is also distorted the grandfathering provisions for its own gain.
Fully underwritten policies are deemed grandfathered.

Huh? Are you referring to insurance policies? I thought all insurance commission was exempt from the conflicted remuneration rules, and is therefore not affected by the removal of grandfathering?

Well thats a surprise AMP moving the goal posts to suit themselves, the did the same with Adviser Development loans,and have never cared about their advisers its all about the share price and nothing else. Such a pity, people like Kerrie Roberts ( A gentleman) would turn over in their grave if they could see what the AMP is doing to its staff and advisers. A disgrace.

AMP adsvisers should vote with their feet ! Where it is in their clients best interest move the funds from the AMP .

That's the point AMP advisers cant vote with their feet. They have to sell the clients back to AMP at the reduced multiple and then have a non compete period to sit out. AMP wins regardless and they know it.

And if they try to move their clients out of AMP products, AMP will launch their weaponised compliance team onto them.

100% correct Anon. They are a corrupt and unethical organisation on several fronts!

Having gone through AMPs Horizons academy I can tell you for a fact that the pressure the organisation puts on to purchase one of their books is appalling. This poor excuse for a company does not have a single moral

Some might argue that advisers who purchased client books from AMP at the inflated value of 4 times, did so with full awareness of the potential risks. But in many cases these sales were deliberately promoted by AMP to "career changers". New entrants to the industry who did not fully understand the risks or the value of what they were purchasing, and trusted AMP to do the right thing by them. People who used their homes as security to borrow from AMP Bank, to pay AMP the inflated purchase price.

AMP further exploited many of these people by selling them the "rubbish" clients, with out of date contact details or high likelihood of switching. Long standing "high value" practices had been allowed to selectively sell back their rubbish clients for 4 times, while retaining their best clients, even though this was contrary to the standard BOLR rules.

It would appear that many of the career change advisers who purchased client books from AMP may have been duped into unconscionable contracts.

This is no different to the Govt pushing to legislate now against grandfathered commissions that were previously absolved from being included within FOFA legislation based on legal advice provided and accepted and because in Bill Shorten's words " will not apply to existing contractual rights of an adviser to receive ongoing product commissions".
I would suggest the AMP advisers have a contractual right in relation to the negotiated BOLR, but lets watch AMP do everything in their power to waste and burn advisers who have supported them through years of turmoil and angst.
It is demonstrably unethical in every sense of the word.
In addition to this, AMP will now try every trick in the book to try and ping an adviser with a minor compliance breach that may have occurred a decade ago and apply current compliance requirements to retrospective advice parameters.
This will be purely to satisfy a get out clause in the BOLR and hence their obligations.
Sure, getting 4.5 times now is very difficult, but that is on the open market and the agreement with AMP is internal and has been negotiated and signed off.
Now, AMP want to change the goal posts and destroy peoples lives because it's suits them...just like the current Govt does with the grandfathered commissions.....they want to change retrospective legislation to suit their agenda.
It's not on and its filthy, dirty practice and goes to show that a relationship is always under the control of the party who cares the least.

And there are some a who were allowed to purchase AMP orphaned client list based upon post codes. And on review, of those post codes, were allowed to dump unproductive clients to potentially productive clients to justify the AMP purchase price.
I'm not quite sure where the 4 time multiple BOLR came in at purchase,... onlly on sale.
Advisers were offered a client base of around $50,000 recurring review for a purchase price of $27,000 when someone I knew was approached to buy into the AMP deal

Not quite Aleycat. AMP used to allow advisers to "lease" a $50K recurring revenue client base at $27K pa for a maximum of 4 years. The adviser then had the option to buy it outright for $200K (4 times) or hand it back.

This program had a very poor conversion rate into eventual purchases however, because it gave the adviser 4 years of well informed due diligence. Even when advisers were allowed to swap out some of the dross in the first year, the lack of value soon became apparent to many. So AMP canned the leasing option, and switched to coercing naïve newbies into upfront purchases at 4 times.

AMP has benefited by making the purchase multiple above market value as this grows the amount of the loan and interest to be repaid. Then would not allow for the loan to be repaid and debt to be closed (partial sales were never allowed) further profiteering. Then failed as a licencee (hence it is currently the subject of multiple undertakings?) to provide it's planners with proper paperwork and guidelines to follow and now is using it's own failures to create rules to pay out as little as possible, all whilst charging up to 23% as a dealer cut (fee for no service anyone?). AMP has used government legislation before to take away clients without compensation. Now they are doing it again.

Seems to me that majority of these advisers should have been aware of the grandfathering legislation that was on the table. Once they lose revenue from all the customers they have not serviced for years, while collecting commission. Seem they would have then on sold their book back to amp based on a revenue value that was no longer accurate to collect a fat cheque and retire. Seems like these 'adviser's' should have taken some notes and known their risk profile. Even at 2.5 times revenue these advisers are probably getting 200-300% the value of their book, once grandfathered commissions are removed.

Quite the contrary in regards to grandfathered commissions. Shorten had legal advice that clearly stated that grandfathered commissions could not be turned off when FOFA went through. Stop stating beliefs rather than facts to push your agenda that all advisers are rip off artists. People made business decisions based on this and product manufacturers are gladly breaking these contracts, yes contracts, for their own benefit, not for the benefit of clients. As a result many advisers, the vast majority who service and care about their clients are now being left out to dry. Some are taking their lives, but keep making smarmy comments about fat cheques and rip off artists.

Plenty of advisers are now taking their lives because of the actions of unethical financial advisers. I have little sympathy. Plenty of advisers have also said no to AMP and also to BOLR.

On AMP's website it states under the heading of "Advisers"......
" We're committed to being your business partner of choice".
Shouldn't that read "chance" ?
Marketing is one thing and reality is another.
It's just spin and smoke and mirrors.

In Victoria at least, where Government inertia allowed illegal ride share operators to ruin their businesses and livelihoods, at least they received a tiny amount of compensation. In the financial services industry where Government inertia allowed insurers, banks and superannuation funds to offer junk insurance over the phone or net, through high pressure sales techniques and hopeless default covers, the advisers (and their small support teams of humans who care) who operate their own small businesses, get nothing but depression, anxiety and financial insecurity.

No mention of the clients in all of this who have been ripped off over many decades

Some clients have been ripped off John. But many clients have done extremely well from AMP advisers under the old commissions based model. Older clients with low super balances received lots of valuable advice to help them structure their finances and maximise their Centrelink benefits. They also received empathetic reassurance to help lower the stress and anxiety associated with such matters.

How was this service paid for? Certainly not by issuing invoices to anxious, low income part pensioners every time they picked up the phone. It was paid for by the inherent cross subsidy in the commission model from richer, younger, clients with fewer current requirements. The "ripped off" people as you call them. Moving forward there will be a lot of older, poorer, clients who will no longer be able to get the valuable support of a financial adviser. Hayne, CALC, Choice and people such as yourself will no doubt claim this as a victory for fairness.

I have worked within the AMP group for the best part of 30+ years (coming from an old NM/AXA now AMP) background. Over my working career there have been some brilliant people I've come across - sadly not may left with AMP but there are still some. I hate the disruption/turmoil that's going on at the moment but hoping some sanity can be provided in the near future - It is needed. Governments, RC, Compliance have resulted in all financial institutions losing the plot.

Started at AMP back in the 90's but after 7 years left as even back then the writing was on the wall.

Now a happily a self-licensed IFA with a successful business, an open APL, a wide number of non-remunerated professional referral partners, young planners under me and happy staff.

While I believe the initial training AMP provided was invaluable, I find it hard to fathom how any self-respecting professional with a modicum of intelligence could not have perceived the conflicts apparent back then as well as foreseen a future issue with how that organisation was set-up, especially with it's 'sales force' which is exactly what the AMP 'planners' always have been & will be.

From my experience, most of those AMP agents now complaining about the 'recent turn of events' were the old lazy ones who were happy milking the system with no thought to make changes themselves, or were too scared to take the step outside of the AMP corral for fear that they couldn't make a successful business outside.

I would hazard a guess that if you're a young planner who has come out of the academy, has good compliance and you're motivated and willing to work hard, then AMP will keep you on and honour any loans etc that may be in place. However of you are one of the old guard, who I know from experience were life insurance sales people sourced from being a butcher or truck driver or small town local alcoholic football bogan who knew a lot of people, then finally your time is up and probably not too soon either.

One particularly grumpy old AMP pusillanimous incumbent for the last 28+ years has whined like a pom about leaving AMP and how atrocious they are, but never has made any real effort towards this, especially as he is happily rarely ever at his office leaving two staff members to manage the multi-hundreds of 'clients', while living off monthly commission payments that keep rolling in no matter what little real work is produced or clients ever actually reviewed. You can't tell me that is compliant via BID or should even exist in this OASA or F4S world.

So no real pity or sympathy for these crusty old guys who have lived large expecting the money train to keep rolling on with a fat payout at the end; if they haven't saved enough for their own retirement outside of any business sale, as we advise our clients in the real world to, then they reap what they have sown.

Haha, love the 'small town local alcoholic footy bogan' AMP agent comment! Knew a guy from north Queensland many years ago that in my own observations seemed to fit that comment perfectly and had a name surprisingly similar to the singer Bob Marley.

HA HA that's hilarious. I also read that and thought "Bob Marley"

Yes right on the ball, sounds like you knew him too :D The guy was dangerous, had the confidence of a king yet the IQ of a brick, and conversations were as enlightening as trying to get sense out of an old strutting pigeon

I'd take a guaranteed 2.5 times any day of the week. I've got absolutely No g'tee and I've got no certainty and the Government could change the rules at any point on my business model. My entire client base could leave tomorrow. What other businesses get a guaranteed 4 times BOLR. What other businesses have business costs and licensing so heavily subsidized. How many other businesses have such a gravy train of clients? How is it that I'm competing with an AMP firm that can get away with showing no relationship with AMP, disclose that their affiliated with AMP via a small print on page 10 of a website and yet I compete with that. Just remember the APL is AMP and another company based on who pays them the highest fee year after year, and with that relationship AMP advisers think they're independent. AMP advisers have had it pretty good and if you live in that environment expect Government changes. Personally, Yes I'm sorry to hear about this major impact but you haven't had it too bad and most AMP advisers have a heavily subsidized future with AMP and a guaranteed buyout at the end still. Whilst I have nothing.

Adam, valuations of planning businesses is changing, it will be on profit/loss in the future, none of this recurring revenue times x stuff. Don't worry we will get a decent price when we sell our businesses, as going concerns though, not as revenue based books of business, as long as you have a good business model with a engaged client base, your business will be very valuable in 5 to 10 years time.

thanks a lots


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