Inside AMP’s ‘weaponisation’ of BOLR exit audits

The Adviser Association chief executive Neil Macdonald told ifa that advisers who had enacted their BOLR terms were subjected to “binary pass or fail” audits regardless of the client detriment attached to any breaches contained in a file, and were not given the opportunity for independent oversight or appeal of the process.

“The process is the auditor comes in and says ‘that file fails’ and it then goes to a committee to decide whether the consequences are going to be applied or not,” Mr Macdonald said. 

“Effectively, the planner’s PM or regional manager put their case to the committee, which is essentially AMP senior management. Our concern is, is that a reasonably independent process?

“From our perspective, we’ve said there needs to be procedural fairness in that — the planner should have the right to representation and have the right to appeal.

“I think if somebody is going to lose $2 million, they should be able to represent themselves or have some independent representation there.”

The terms of advisers’ BOLR contracts meant AMP reserved the right to pay nothing for an adviser’s client book in some circumstances where a high percentage of their client files had failed an exit audit.

A spokesperson for AMP told ifa that the BOLR audit process is designed to ensure advisers receive “fair appropriate valuations based on the quality of their business and fulfilment of their service agreements with clients”.

“AMP works with advisers during the process, providing the opportunity for advisers to improve their BOLR outcome by fixing issues,” they said. 

“There is also a process for advisers should they wish to have their audit reassessed and present additional information.”

But Mr Macdonald said the audit process could see client files fail for minor breaches such as not including a financial services guide in the file, and for breaches dating back as far as 2008.

“Our view is that AMP should be looking at files from 2018 onwards, because the ones prior to that were picked up by their lookback program,” he said.

In addition to the changes to BOLR values from four times to 2.5 times annual revenue in August 2019 — which were being contested through a forthcoming adviser class action — AMP could also vary the price paid for a client book if they did not judge some revenue to be recurring, which Mr Macdonald said had caused further issues since the removal of grandfathered commissions.

Around 500 advisers had left AMP in the last 18 months, and more than 150 of those had raised concerns with The Adviser Association around the exit value paid for their business, Mr Macdonald said.

As part of sweeping changes to its advice business, AMP had also terminated 250 advisers that were deemed “lower profitability”, according to comments from Labor senator Deborah O’Neill earlier this year.

Audit failure rates on the rise

The wealth giant has reported that since the new commercial terms were implemented in August last year, close to 80 per cent of advisers have received their full BOLR settlement, with no discount applied. But an AMP spokesperson did confirm the pass rate had “marginally” declined on the 12 months prior.

Mr Macdonald said there was no doubt that “more advisers were failing” the exit audit process since AMP had reset its commercial terms in 2019, in what many advisers were calling “the weaponisation of the BOLR audit process”.

“Generally speaking, when you are going to go BOLR, it’s your choice, so you start tidying up your records, you align your service packages, you do the things you need to do to exit as efficiently as possible,” Mr Macdonald said. 

“This group of people, because they weren’t planning to go, are caught by that.”

With AMP able to legally argue that audit failure constituted a breach of an adviser’s BOLR contract, it was possible those who failed their exit audits would not be eligible to join the class action being run by Corrs Chambers Westgarth, he added.

“Our view on the multiple change hasn’t changed since September, which is that the best possible outcome for our members was to take legal action against AMP with the class action,” Mr Macdonald said.

“What we’re trying to get for the exiting planners is if there is a payment which is reducing the BOLR by more than that, to allow them to continue to participate in the action — so, if there’s other reasons why it’s fallen, what are those reasons?”