Worried about AMP and BOLR? Don’t ask ASIC

The Australian Securities and Investments Commission (ASIC) has done its utmost to step around parliamentary committee questioning about its views on the manner in which AMP Limited has handled its relationship with financial advisers and buyer of last resort (BOLR) arrangements. 

Asked highly pointed questions by Victorian Liberal back-bencher, Julian Hill ASIC declined to speculate about the intentions of the Royal Commission and also declined to speculate about what thinking and decision-making may have transpired within AMP. 

Hill asked a question noting that “the committee has received evidence of substantial reductions in the practice values of AMP financial planners under the AMP Buyer of Last Resort scheme and the transition away from grandfathered commissions” before asking “Did the Royal Commission anticipate the destruction of practice values (small businesses in effect) in the transition away from grandfathered commissions?” 

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ASIC’s formal answer was that: “ASIC cannot speculate as to whether the Royal Commission anticipated the ‘destruction of practice values in the transition away from grandfathered commissions’.” 

Hill then noted that “AMP’s audit of its financial planners seems to have further reduced practice values by applying 2020 compliance standards to transactions and practices that occurred in the previous one or two decades. What drove this? Why was it done? Who determined the audit standards and methodology? What were they and why? What view and role does ASIC have with respect to the methodology and application of the audit process to financial planners?” 

ASIC answered as follows: “ASIC cannot answer questions about AMP’s motivations, reasoning and decision-making. ASIC has no role in relation to the methodology and application of the audit process to the determination of rights under the Buyer of Last Resort contracts between AMP and is representatives.” 

“ASIC, in its role as financial services regulator, is responsible for ensuring that AMP complies with its financial services obligations, including its obligations to ensure that its representatives, such as financial advisers, comply with the financial services laws. In complying with these obligations AMP may conduct audits of its financial advisers.” 

The Liberal back-bencher then asked about the three-year restraint of trade clauses imposed by AMP on its financial planners as part of the scheme noting that [they] “seem unreasonably harsh in the circumstances. Further, it is difficult for those subject to restraint of trade clauses to litigate them. Does ASIC have a view or a role with respect to the restraint of clauses being imposed by AMP on its financial planners? If ASIC does not have a role, which regulator does?” 

ASIC answered that it did “not have a view or role with respect to the restraint of trade clause”.  

“Based on ASIC’s understanding of the Buyer of Last Resort agreements, ASIC is not aware of any regulator that has a specific legislative role in relation to restraint of trade clauses in those agreements.” 

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ASIC, the toothless tiger, do as I say, not as I do. Why do the product providers and directors on their boards not have to belong to an association, like planners do, that compel them to comply to an ethical standard, something like the AIOCD, and when they don’t perform their duties they too can’t be in that role again. This should also apply to government departments to avoid these idiots skipping from one place to another when they’ve screwed things up…

I know nuffink! I see nuffink! I say nuffink! Just send money! Cash!

In criminal law, if you supply the gun and the ammunition you are complicit in the resultant crime.

Its a shame, these AMP planners seem to think they are all immune to the economic environment and happenings relating to the outcome of the Royal Commission. The Royal Commission destroyed value for every single Financial Planning Practice in Australia. So why do the AMP FP's believe they are any different? Very unusual way of thinking. Anybody who has ever managed their own business in the Financial World know that we are up against a tirade of issues that may present themselves at any time, its common knowledge. The fact that this was an industry wide change should be enough for them to recognise that the value destruction had nothing to do with AMP, it has to do with the entire industry.

As I understand it, has to do with what was in the contract and how AMP changed the BOLR value without the designated consultation… while I understand your point about commercial reality, it more about how the big boys bully the little guy that’s the issue…

Many AMP planners bought client books at an inflated value of 4 times, at a time when AMP had overly generous BOLR rates of 4 times. They blithely assumed that these issues netted out to a money back guarantee if anything ever went wrong.

However in the world of contractual reality, there was no guarantee. It was a highly risky investment. Reductions to BOLR, regulatory change, and decline in the AMP brand, were all high probability risks which ultimately occurred. Some planners made good money from their purchase in spite of these headwinds, others did not. Of those that didn't, many are now exhibiting the classic behaviour of investors who purchase a risky investment at a high price, then try to blame others when it doesn't work out.

Did it really, if I want to purchase a mortgage trail book now or financial planning fee book , I will be paying 80% less than what I would have before the RC. ??

Your comments are entirely sensible and fair. AMP itself lost 80% of it's value. Advice practices have to be valued at prices that reflect the new reality, expectations and community standards.

"Community Standards" - made me laugh. What exactly are community standards. As far as I can tell, those moving from Retain where commissions to pay for the services of a Financial Planner and moving to Industry Super where a fee is charged year on year on year for the possibility that some service might be needed at some point. Seems to me to be a big yes from "community standards" to old way AMP operated - and the way Industry Super now operates.

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