AMP chief executive Francesco De Ferrari fronted the House of Representatives standing committee on economics on Thursday, copping questions about its recent sexual harassment scandal and the group’s current recruitment of advisers to its network, after terminating multiple practices.
Committee chair and Liberal MP Tim Wilson, Liberal MP Celia Hammond and Labor MP Anne Aly all referred to emails they had received from AMP advisers, with a range of stories reporting on the impacts of the BOLR reforms.
AMP previously sold its financial planning books under the BOLR agreement for four times annual revenue, promising to buy them back for the same terms, before it cut the rate to 2.5 times annual revenue in August last year.
A collective of advisers from AMP Financial Planning filed a class action against the wealth giant in July, over losses many were said to have suffered due to the policy change. AMP is defending against the claim.
Mr Wilson commented in the economics committee proceedings he had received accounts from a number of advisers in the group, saying AMP had broken its BOLR contracts, with “no compensation and the destruction [of] their businesses and lives”.
But AMP chief executive Francesco De Ferrari defended the group, saying he was confident AMP had fulfilled its consultation obligations and the BOLR changes had passed the bar, legally.
“Legal and what may be ethically right can be different things, do you believe what you’ve done is ethically right?” Mr Wilson asked.
“I fundamentally believe so,” Mr De Ferrari responded.
“You fundamentally believe so, but do you think there’s a difference between ethics and law, what’s legally right?” Mr Wilson said.
“We’ve continually asked ourselves, do we have the right to do so and should we do so?” Mr De Ferrari said.
“…We don’t hold these practices for ourselves chair, we sell the books on to other practices. Typically we sell them over the last year at a little less than two times revenue. And so, buying them at four and selling them on at two, it was not really commercially sustainable.
“I appreciate that this is a tough choice and that’s why we are working together with our aligned practices to try to accompany them in this process, but again we’re one of the few players in the industry who offer this facility and this support.”
Mental, emotional harm is ‘unconscionable’: Liberal MP
In Thursday’s proceedings, Liberal MP Celia Hammond read an account she had received from an AMP adviser.
The person stated they had operated a financial planning business for more than two decades, with five employees – having bought into a closed market, where AMP set the price and controlled who can buy, sell and value the business. The transaction was financed through AMP Bank.
“After 21 years of service to AMP, three months after they knew they were buying my business and three months before settlement, they unilaterally changed my contract,” the recount read.
“AMP’s egregious action devalued my business by over 50 per cent. The outcome of this, instead of leaving AMP with a business valuation, AMP has put me into a position where I have to pay AMP to leave, so that AMP take the asset that I have built, at no cost to them.
“Obviously this action by AMP will obliterate my personal financial position, causing long-term harm to my family’s health and future.”
The adviser also claimed three months prior to the BOLR change rollout on 8 August 2019, AMP tried to sell additional books to him at four times the cost. Three months later, the offer was reduced to 2.5 times.
Mr De Ferrari admitted there was an issue with people who had already given their notice to sell their businesses back before the BOLR changes were implemented. He added the group was working on “finding individual solutions to each one of those cases”.
“Well I put it to you that given the feedback that all of us have received, that perhaps you need to be a little bit more proactive and a little bit quicker in contacting these advisers, because there’s many out there,” Ms Hammond said.
“Yes, you might get to them at some point in time, but the harm that’s been done to them, mentally and emotionally, if they have to wait for that, is unconscionable.”
She noted the matter was linked to the culture of the organisation.
“I implore to actually make personal contact with all of these people,” she told Mr De Ferrari.
“The fact that people do think they’ve been put out on a limb and you’re saying that you are kind of working with all of them, the fact that they’re still out there thinking they’ve been left out, is also a sign that perhaps goes back to the root of the cultural problems.”
Labor senator Deborah O’Neill has previously called for ASIC to commence an investigation into AMP’s BOLR arrangements, but the company had defended the decision, calling it “difficult but necessary”.
In July, the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) referred more than 60 BOLR-related complaints from AMP advisers to mediation.
De Ferrari, an unethical grub talking about ethics. That’ll do me!
The legal position will be worked out in the court, unless of course AMP forces exiting advisers to sign away their rights to legal action – which they are doing. The 4 times multiple was unsustainable however AMP has not worn any of the loss linked to their decision making in this area and has actually profited from it. Basically all of the losses are being passed onto the small adviser firms who are being destroyed by this muppet. If this is ethical then I am a pink gorilla.
Did AMP write off the loans by the same amount? If not, they are full of it.
Don’t be silly. That wouldn’t have been ethically suitable for their shareholders. Just like you can’t sack someone who makes you money for sexual harrassment and you don’t realise the bloke you specifically picked for the Australian CEO role has an interest in photography. This man has the ethics of Peter Foster.
Just another reason to get advice well and truly out of instos and product manufacturers once and for all.
Does either the FPA or the AFA still retain the partnership or sponsorship of AMP ?
If so and dependent on the outcome of this class action against the corporate behaviour of AMP and it’s treatment of it’s advisers will the FPA and the AFA continue to accept monies from this organisation ?
Not the FPA
more so a question of ethics then, which has always been troubling for AMP
This is why i think all mid level managers and up of financial instos need to do the FASEA exam. How much does it suck to be held to a different ethical code than the one your own industry uses. And then they promoted the guy who had proven to be engaged in sexual harrasment. Again big ethical FAIL. (i know the promotion decision was over turned but still…)
You and FASEA are the only ones that believe ethics can be learned.
Ethics can very much be taught and learned – by example. Courage to behave with integrity even when it is difficult is a bit harder to teach and learn but it is doable, not by academics though.
Good point.
There is very little example setting behaviour going on at AMP.
So many unqualified people in the Wealth division who have never added any value and don’t know where the professional standard is.
If fact, most of the 5,778 employees take their big salary, believe they are terrific and nothing will ever happen.
When the music stops, and Fiat is gone, and there are no more “re-pivoting” options left, they might be surprised.
Whilst I hate doing the BS FARSEA Ethics course, that is so repetitive and time wasteful.
Of Advisers are made to do it then so should all:
– CEO’s of Financial Institutions,
– CEO’s of Life Insurance Institutions,
– Trustees of Super Funds
– managers in financial / insurance institutions
– ASIC, every employee CEO and down
– APRA, every employee CEO and down
– ATO, every employee CEO and down
– Politician’s, All of them
– FARSEA, board and employees
– FPA, AFA, FSC, etc bodies CEO’s and down
All these people Must be made to do the Ethics course as far too many have been shown to have none.
Won’t happen, foolish comment.
It won’t happen but that doesn’t make it a foolish comment. People who are involved with advisers should have to do the same training
The exam isn’t the issue. It’s being held accountable to a code that is above the law. The people you mention doing the exam won’t change anything.
Que IOOF and the heads of bridges rubbing their collective hands together and smiling.
AMP is guilty on so many unethical fronts, we could spend years recounting them all! Let’s face it, they have a culture that does not care about the people that help them survive. They have no soul and the new CEO is that ultimate unethical ultimate decision maker. The Government needs to step in and force them to do the right thing, certainly they have shown a history of using their size to bully their Vulnerable advisers – that trusted you would honour their agreements. Shame on you, and I look forward to seeing your down fall!!!
Well said
BOLR had to be changed because it was just so commercially unsound. There are a lot of successful AMP advisers who grew their initial client books with new clients, which they never paid for just acquired through their own hard work, and those “free clients” ended up up in the unsound BOLR 4X book. These advisers can’t complain about only getting 2.5X for those clients ONLY ( perhaps ) the clients they bought at 4X. There are another lot of very average advisers who could not survive outside of the AMP bubble – predominantly those with smaller books that never grew over time. As tough as it is for these advisers surely they knew that the bubble was unsustainable. If they didn’t then I suggest perhaps they weren’t as commercially knowledgeable as I would want my adviser to be. What AMP had done is on the harsh side but it had to be done. And these pollies need to do a bit more research on the industry before firing off based on one sided advisers letters
“commercially unsound”. Re-he-heally?
AMP never had to pay out – BOLR was intended to prevent competition. It was very commercial in fact!
AMP sold at 4 times to incoming buyers of books which was so nice for them and/or departing Principals.
Now the shoe is on the other foot and they have been called to buy up on their anti competitive, in bred country BS and then cry foul.
Saw this on another site but Sound words = Perhaps Mr de Ferrari should consider what his words “BOLR at 4x is unsustainable” means? To me it means we cannot afford to pay, that is we are unable to “meet our contractual obligations as and when they fall due” which is of course the definition of “insolvent”. If AMP is trading insolvent the company should be placed in external administration and Ferrari and his cohorts prosecuted for breach of Corporation Act, to wit “trading whilst insolvent”.
You don’t understand that these advisers were purchasing servicing rights, AMP owned the clients, with loans to the same amount. AMP packaged up shit and locked advisers in with inflated loans. They are stealing all value via unethical audit practices and reselling to new unsuspecting advisers. Talk about theft, fraud and churning.
Their probaly trying to protect their bank, which in the background has provided the loans to help keep advisers looking after their product. Just a guess – would likely to consider selling their bank as a viable asset.
To the AMP planners – I am so sorry this is/has happened to you.
If there is any silver lining to be had, then know you have left a business that is morally bankrupt and one can live in hope that AMP Group is dead man walking.
Ethics – when you don’t have them, you don’t know what they are much less why they matter
This is completely unethical but considering this is AMP who have operated in this manner in regard to their customers and clients for decades what else would be expected. If we took this approach to clients and inceased our fees unilaterally ASIC would be all over us. How is it even legal for one party of a contract to unilaterally change the terms of that contract to the detriment of the other party.
AMP a once very strong financial services company is heading for the corporate graveyard with these and other decisions.
Dear Mr Fast Car, AMP made millions of dollars by locking in their advisers through an inflated BOLR plan. In return they got basically a tied distribution force. They provided many other incentives to keep people loyal along the way and in return they got sales they probably didn’t deserve. It made very good commercial sense for AMP at the time. Now when it was time to repay the favour you renig on promises made in good faith by your predecessors. AMP has a huge cultural issue that can’t be fixed by being dishonest.
AMP wouldn’t know what ethics is if it hit them in the face – wish it would! What they have done to the people who supported them and their brand is beyond reprehension. Every director needs to serve serious jail time. I’m not an AMP adviser either.
Well what else can you say. This just speaks for itself….
Total disgrace
I think someone would fail the FASEA ethics course
How are there no comments on this article ?? I am not even a financial planner (I am an accountant) but I have an insight into this whole saga and it is absolutely disgusting. I find it incomprehensible that an organisation would do this to people who are representatives of their brand. How can they possibly claim it is ethical, what they have done to their planners. Time to step up politicians. Even to laymen this is completely unfair
It’s what happens when the money runs out.
It may well have been legally right but I can assure you it is not ethically right. I am not an AMP adviser either.
As one of these advisers and facing an uncertain financial future, as well as the ongoing survival and stress of what AMP are putting us through just to send us packing, I find Mr DeFerrari’s comments a complete pack of lies. AMP are not working with any practice that has been asked to leave, there is no negotiation, no compromise. They have reduced the BOLR, kept instituional ownership and maintained outstanding debts based on the old BOLR valuation. To leave and take clients you have to refinance, but who will take on that when the original finance was based on the higher value BOLR. AMPFP sell the clients, AMP Bank finances it and AMP Ltd call the shots. Sick of the lies that this company continues to push to the general public and media. If they are acting ethically or morally, then it is a different set of rules that advisers have to abide by with their clients.
It is about time the same rules applied to the corporate executives in financial services as they do to the frontline advisers and their clients.
Mate, I am not an AMP adviser but i feel for you. As a principle I will never recommend AMP product in the future and as a show of solidarity perhaps other advisers need to start recommending other options, based on best interest of course.
Perhaps De Gori and Kewin should get of their tushes and get FASEA to make the code applicable to anyone connected with the industry, particularly licensee employees. The upside is that they will get a lot more fees (surely they will salivate over this :), but also make them committed to the same ethical standards.
These are good points. Why then did you choose to participate in the past?
If they have kept institutional ownership, how can you leave and take clients with you even if you can refinance?
Thanks Anon and Anonymous, AMP have generously allowed a release of institutional ownership as long as we can refinance, pass on the lookback and probably sign a waiver that we will not participate in any class action as well as paying back the full mount of the outstanding debt based on a valuation that they have reduced considerably. AMP offered several options and that is why they say they are working with us, because we had the opportunity to make a choice. The only difference between each option was the depth of despair that it left you in.
My reason for being involved with AMP was the BOLR arrangement and the future plan that I had set myself for retirement. I am one of the lucky ones that has some time up their sleeve to potentially recover from this debacle. Never thought of ourselves as tied to AMP product and were not afraid to look outside of the box. I think this is part of the reason for being added to the chopping block.
There was also a time when it felt like a business partnership, that has since disappeared though.
Of course he would say that….what else would he say at this point ?
He certainly wouldn’t say ” we have been immoral, unethical, sneaky, disloyal, untrustworthy, and we are eternally sorry for the pain and financial destruction we have caused to our very own advisers ” !