The changes brought in to the BOLR policy were ‘simple’ and did not require an extended consultation, according to a senior AMPFP executive.
In the Federal Court in Melbourne this week, Justice Moshinsky ruled AMPFP lost the case on all counts and ruled in favour of the lead applicant Equity Financial Planners and sample member Wealthstone.
The class action was filed in July 2020 on behalf of advisers who had been authorised by AMPFP. The claim related to changes made by the firm to its BOLR policy on 8 August 2019. This had seen AMPFP cut its BOLR terms without notice from 4x recurring revenue to a maximum of 2.5x with immediate effect. A glide path would then have reduced it by 0.1x every month to reach 0x by January 2021.
A key criteria in the case was whether AMPFP should have consulted on the change with ampfpa, an organisation representing practices in the AMPFP network.
In its own BOLR policy, AMPFP stated: “AMPFP has the right to make any change to this policy should legislation, economic, or product changes render any part of this policy inappropriate following consultation with the ampfpa.”
The proposed BOLR changes were first described on 25 July 2019 and feedback was requested from ampfpa by 6 August 2019 allowing only eight business days for consultation before they were announced widely on 8 August 2019.
RemCo stated on 28 July 2019 that that content of the proposed BOLR change was “the most serious sequence of changes that will impact our members (including their clients) in the history of our relationship with AMP” and requested a longer feedback period.
AMPFP then replied on 30 July stating the time period was reasonable, the ampfpa was familiar with the changes, and the changes has already been discussed “in some form” over the past 12 months.
“While we would ideally like to receive and consider any further comments from you before we finalise and announce the changes, we want to highlight that in the event that you do not respond to the consultation materials that we have sent to you, we intend to continue with the proposal,” David Akers, managing director of business partnerships of the Australian wealth management division of AMP Group, replied.
Giving evidence in the court, Akers said he believed the BOLR changes to be simple.
“He stated that he considered the most material changes, being the change in the multiple from 4.0x to 2.5x and the glide path for grandfathered commission revenue, to be simple in nature,” Akers said.
Commenting on this, Justice Moshinsky said: “I understood Mr Akers to be conveying that the proposed changes could be readily understood by the RemCo [ampfpa’s remuneration committee] members, given their familiarity with the industry, the AMPFP network, and the BOLR policy.”
However, he continued, the time it had taken AMPFP to develop the proposed changes over several months was inconsistent with the brief time allowed for feedback.
“…. It does not follow that only a limited period of time was required to consider and provide feedback on the changes. One of the areas where a significant body of work was required was to consider the impacts of the proposed changes on particular cohorts of practices, in order to consider options and alternatives. For example, it was necessary to consider and provide feedback on the impact of the proposed changes on practices in the pipeline,” Justice Moshinsky said.
“At the 25 July 2019 meeting, AMPFP floated two categories of practices in the pipeline that could be exempted from the changes. Subsequently, AMPFP indicated that it would exempt those two categories. However, it was necessary and appropriate for ampfpa to consider and provide feedback on whether there were other categories of practices in the pipeline that should be exempted from the changes and on whether the changes should apply to practices in the pipeline at all.”
He concluded ampfa should have been given at least six weeks and questioned the need for AMPFP to urgently announce the changes specifically on 8 August 2019.
“I consider that there was some urgency in relation to the changes, but they did not need to be made on 8 August 2019 and a longer period of consultation (e.g., six weeks) could have been allowed,” Justice Moshinsky said.
Justice has been served and I only hope AMP do not appeal. AMP planners have suffered enough since Aug 2019 and Justice Moshinsky made the right decision.
This type of attitude is typical of Mr Akers and all senior executives at AMP at the time. They were more interested in self promotion and preservation than doing what was right and fair. All these executive knew they would do whatever they could to get their bonuses and move onto the next high paying role somewhere else. They simply had no skin in the long game. Good luck to anyone dealing with Mr Akers at KMPG.
The ruling was 194 pages long and effectively stated that AMPFP did not give sufficient time for the changes to be considered and should have provided the required 13 month timeframe that they had previously contracted to. The answer to the heading is therefore yes as determined by a judge. The finding also disagreed with David Akers opinion as detailed above in this matter (ie) the judge felt more time for the changes to be considered by AMPFPA was appropriate.
The reason for the consultation, and the 13 month notice period before any AGREED changes could be enacted, was to allow any planners who didn’t like the changes to hand in their notice under the EXISTING rules. It follows then that the reason AMPFP rushed this announcement was because it knew that NO planners would willing accept such a significant drop in the value of their retirement asset – i.e. the change itself would have caused a rush on BOLR.
Instead, AMP tried to lie and bully their way through this one. The brutal treatment of planners in the exit process, the exit audits and even lookback audits has led to significant mental and emotional trauma that will take years to heal, as well as the permanent loss of many good advisors from the Australian landscape. Shame on you AMP!!!