‘Double whammy’: Some AMP firms’ value reduced by up to 90%

In a recent episode of The ifa Show podcast, The Advisers Association chief executive Neil Macdonald said while 80 per cent of planners who were terminated as a result of AMP’s advice changes in August 2019 had reached an agreement with the group, there were “individual firms” remaining that were most challenging to resolve.

“The ones that are left who wanted to stay in the industry but AMP wanted to exit are the hardest for us to get a good outcome for,” Mr Macdonald said.

“It’s compounded by the BOLR value going from four times to 2.5 but in addition to that, bearing in mind that BOLR is four times recurring revenue, the recurring revenue is zero because grandfathered [revenue] is being removed.

“Some of the ones we’ve spoken to have had a double whammy, it’s been the four to 2.5 but it’s been further impacted by the loss of grandfathered commissions and the lookback programs and the exit process.

“So we’re at the point where we’ve gone from three or four broad groups we’re dealing with to individual firms that we’re trying to get the best possible outcome for, and that will depend on their circumstances.”

Mr Macdonald said some practices had had their book values more than halved as a result of grandfathered revenue being removed, and had then had the remaining value reduced by up to 80 per cent because of their exit audit results.

“I don’t think anybody’s had their total BOLR value written down to zero, but we’ve seen some example where their BOLR value might have been $2 million and grandfathered commissions might have been $1 million to $1.2 million, so there’s $800,000 left and there’s perhaps issues around FDSs so there’s a multiple whammy, and there’s an application of a standard percentage drop depending on how you pass your audit,” he said.

“Those are the areas we’re focusing on [with AMP], saying if the planner could rectify what’s wrong, then you don’t need to apply the 60 or 80 per cent discount. It’s lifting up the bonnet on that particular planner and saying what happened in your case.”

A spokesperson for AMP told ifa late last year that the exit audit process for planners was "a thorough process designed to ensure advisers receive fair and appropriate valuations based on the quality of their business and fulfillment of their service agreements with clients", and that advisers were permitted to present additional information to have an initial audit reassessed.

Mr Macdonald said the association had been providing support because of the emotional impact of the changes on advisers.

“For many of these advisers, their world has changed significantly. They bought into the promise that one day you can retire and you’ll get a BOLR payment. The world’s changed at AMP, the world has changed around FOFA and BID and everything else as well so it can be quite confronting and challenging for them,” he said.

“The challenge we often find, and it’s probably less so now than it was a year ago in the heat of it all, is if you don’t know somebody’s going through then you can’t help them. So becoming aware of it, a year and a bit ago there were a number of planners I was basically calling every day myself just to make sure they were OK, and one of my colleagues was doing the same.

“So it is a challenge and it’s a very complex issue, and often this is a trigger for other things as well, so it’s something we’re very conscious of.”