AMP Financial Planners Association (ampfpa) will be contesting changes announced yesterday by AMP to its Buyer of Last Resort (BOLR) terms.
Ampfpa CEO, Neil Macdonald said, “AMP is contractually obliged to consult with us over changes to the terms and also to give our members 13 months’ notice of any change that will have a detrimental effect on them. AMP has done neither.”
Mr Macdonald said AMP’s pinning of BOLR to what it claims is market value of 2.5 times is disingenuous.
“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. 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.”
Overnight, many advisers who have invested four times recurring revenue and provided years of service to AMP and to their clients, have seen the amount promised by AMP on exit decimated. “These are typically small business people on the brink of retirement who may now be forced onto Centrelink benefits when they exit.”
Mr Macdonald said ampfpa is also gravely concerned about AMP advisers who have been induced into debt by AMP to buy books from exiting AMP advisers at four times recurring revenue.
“These were valued by AMP for lending purposes at four times recurring revenue and in most cases the purchase was funded by loans from AMP Bank or another tripartite banking arrangement, again at four times recurring revenue,” he said. “In many cases advisers had to put up their family homes as security.”
Given the stress on business revenue as a result of increased back office obligations and changes to revenue streams, Mr Macdonald said repaying the loans will be extremely difficult for some advisers.
“Many advisers stand to lose their homes and some will face bankruptcy,” he said. “We are concerned about the potentially devastating flow-on effect of the financial loss in terms of the mental health of advisers, their families, and their staff, as well as the impact on their clients. What will happen to the clients of the advisers that AMP forces to move on, advisers who cannot, due to AMP imposed restraints of trade, work in the financial services industry for at least three years?”
Mr Macdonald also said that AMP’s announced intention to divest itself of many advice practices and service customers via robo-advice, digital solutions and employed advisers means many consumers will no longer be able to source locally based personal advice tailored to their needs from AMP, only AMP approved product advice. “In our opinion this would reintroduce a sales culture and that is a very poor outcome indeed for consumers and a very poor outcome for Australia.”
About the ampfpa The AMP Financial Planners Association Ltd (ampfpa) is a non-profit, member-based, incorporated association, with a primary role to represent its members. Members are all authorised representatives of AMP Financial Planning (AFSL 232706). ampfpa also works closely with the Hillross, Charter and New Zealand adviser associations.