AMP looks to the future in wake of EU

MM: How much damage has been inflicted to AMP’s reputation by this episode?

MG: I think it’s a little too early to say because tracking brand is done over a long-term and not the short-term. So I think in terms of that we would not be at this juncture entirely sure as to the long-term implications.

What we know from a customer’s perspective, and I guess that’s the perspective we try and think about when we think of brand, is they place a lot of trust in AMP, they see it as an iconic brand, and therefore it is important that when we do make mistakes that we make sure the rectification or the remedy to the mistake is done really, really well. Therefore, we’ll deal with all the people that need to be spoken to in order to make sure if they have any doubt we’re going to offer them a review process to make sure that they’re really clear.

We have a complaints program today, we’ve always had a complaints program, our clients have not complained since the EU, something that’s fundamentally different.

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We monitor all of the various avenues, and we set up a special line for clients to call in if they had any doubt post the EU announcement and we were able to track the people who called in, and I’ve got to say it’s a very, very small number that have called in.

Whether that ultimately means something long-term we need to just focus on getting the actions and activities to where we want them to be to make sure there is no long-term impact.

MM: What’s been the general response from the adviser side?

MG: I’ve spent an inordinate amount of time travelling around the country talking to all of our financial planners. We’ve just completed our latest round of professional development days, so I personally met a lot of the guys there. In taking direct feedback, we had a very open session that allowed them time for questions and answers to make sure we had the right context around things. I think it’s fair to say that some of our advisers are naturally disappointed because any publicity of this ilk is not necessarily good publicity.

In terms of the changes we want to make, I think all of them acknowledge it’s important that we demonstrate a reasonable basis for advice in every instance now, even if we may not have been doing that through the evidence in the file historically. I haven’t heard anyone say that it’s something they object to and they won’t abide by it.

In terms of the future, I think they have aligned to the fact we need to make sure we do this right in terms of the provision of advice and the supporting documentation. But like anything that involves change, it is equally fair to say different people react accordingly. Some people have seen through the change from when it was first announced, have had very few issues from their clients, and therefore have been able to focus on what they need to be doing in order to move forward.

MM: Were you surprised about the shortcomings that were identified given the size of your organisation?

MG: In some respects the simple answer to that is no. But let me give you a reason why that might be the case. You will have seen we have had a difference in interpretation about the principles behind this piece of legislation and, to the extent those principles differed, well then naturally it’s going to give rise to a difference of opinion, as it related to the way in which we went about our business. To that extent we were doing and asking our planners to do what we thought was entirely appropriate within the context of the legislation, which is principles-based.

In that context, to the extent that there were differences of opinion, there was always going to be differences in the application. I know that we’ve got to work through all of those impacted clients and make sure the rectification process is at least giving them the opportunity to ask the question again, whether or not they’re comfortable with the advice that was provided. And if they’ve got any doubts, make sure that they take what’s offered in terms of the opportunity to have that advice reviewed. Principles-based legislation is exactly that, to the extent that we interpret it a particular way and we understood it was not inappropriate to interpret it that way, and others I believe may have interpreted it that way. It’s good now that the umpire has told us exactly the way they want to umpire the game in that context.

MM: Did you consider yourselves to be an easy target for the regulator due to your size?

MG: We need to acknowledge that we are a pretty big player in the industry and that we have a lot of consumers who deal with us because they trust their relationship with their planner; and they have a future amount of trust in AMP as an institution. It’s an iconic institution, so are we going to be a big target, well I think we’re naturally going to be a participant in any surveillance or any review that’s undertaken by a regulator.

What we would hope is that we are treated fairly in that process and whatever is contemplated in discussions with us are the standards that will be applied to everyone, and that this is not therefore a matter of targeting someone and isolating them in a different way to the rest of the industry.

MM: Given your experience with the regulator would you be surprised if another large financial organisation was subjected to the same process you just went through?

MG: I think it’s clear that the regulator has interpreted that legislation in a particular way to the extent that others are operating differently. I think that’s a wake up call not only for us but potentially others in the industry to make sure that they’re now abiding by the way in which the umpire has blown the whistle and interpreted the game that needs to be played.

As to others in the industry, whether ASIC [Australian Securities and Investments Commission] is or is not talking to them I can only judge by what ASIC has said publicly, and that is there are a number of licensees that it wants to follow up as a result of the shadow shopper survey. We were obviously one of those and I’m guessing there are a number of others, I think 13.

MM: Did it ever occur to AMP to test the interpretation in a higher court?

MG: That was one option that was contemplated. If you look at if you have a difference of opinion how do you go forward? Well, one is you agree on where the differences are and therefore move forward on that, or you test it in a court of law.

Now, from our perspective, we felt that we’d deal with it in the way we’ve done. Court action could be long, it could be drawn out, it could be very public and we figured that we didn’t necessarily want to go there. I think one of the reasons is that the legislation is principles-based. We had for good reason an understanding of a particular interpretation, I believe we established our business processes and practices around that interpretation, but who’s to say in a court of law that that’s right and someone else’s view is something to the contrary. I think we had to weigh up all of those factors.

MM: Would it be easier if the legislation were more prescriptive?

MG: I think that we are okay with the way that it is. What we would advocate is that maybe there needs to be a greater level of dialogue around the interpretation. I think everyone would welcome the opportunity to talk about interpretation and the like rather than just being left to one’s own devices to do so. So I don’t have any issues with principle based legislation, but it would be nice to think that there is a means to be able to interpret something without abrogating the responsibility for the interpretation and then trying to determine whether or not that interpretation is indeed acceptable.

MM: Have you agreed with the regulator to have more dialogue in the future?

MG: We believe that we can do things differently and therefore we’re going to focus on that. To the extent that the regulator can give more guidance from time-to-time about issues I think is also a good thing. We haven’t agreed on anything as a result of the EU directly, but I think generally speaking any guidance that a regulator is prepared to give the industry is a good thing. Openness and the ability to understand will engender an environment we can all move forward in.