AMP advisers saddled with ‘off-market’ loans

The Australian Small Business and Family Enterprise Ombudsman’s response to questions on notice from the parliamentary joint committee indicated that AMP Bank offered authorised representatives of AMP Financial Planning up to a 100 per cent loan-to-value ratio (LVR) on practice finance to acquire client books sold within the internal AMP network.

“AMP ARs advise that the loans they were provided with were based on an internal off-market rate by mutual arrangement between AMPFP and AMP Bank, to attract and retain advisers with the intention of developing a career-long association with AMPFP,” ASBFEO said. 

“AMP Bank offered 80 per cent LVRs and in some cases up to 100 per cent.”

The comments came from information gathered by the ombudsman as part of its role in mediation efforts for more than 100 advisers who were terminated by AMP in 2019 as part of its advice restructure, and sought assistance from ASBFEO.

The 2019 changes saw the institution revise its BOLR terms from four times to 2.5 times annual revenue, and AMP has since removed BOLR agreements from its advice model altogether.

The ombudsman said following termination, a number of advisers had been unable to refinance large debts owed to AMP Bank because the rates and terms of the loans held by advisers were not consistent with commercial finance offered in the broader market.

“Eleven AMP ARs have reported to our office that they sought to both refinance their AMP AR loans and have sought alternative financiers for their purchases of client books, but that they were unable to find alternative finance providers,” ASBFEO said.

“AMP ARs looked at similar options from other banks and found that NAB and Macquarie Bank used registers purchased as security, but with LVRs around 60 per cent.”

The wealth giant has previously been criticised by the ombudsman and has had several complaints lodged by advisers at AFCA around the terms of practice finance loans provided through AMP Bank and the close relationship between AMP Bank and AMP Financial Planning.

In its responses to the committee around the question of a conflict of interest between the two entities, ASBFEO said that while “different divisions of AMP would have appropriate separations and independence”, advisers had been led to the impression that in some instances they were one and the same.

“It is clear through discussion with AMP ARs that the close relationship between AMPFP and AMP Bank encouraged a perception by AMP ARs that they were receiving special treatment, and would not have received the same treatment from a non-AMP-related bank,” the ombudsman said.

“While it may be arguable that the separation between the entities was not as clear as may be desirable – for example, AMPFP representatives who were selling client books to AMP ARs would ‘introduce’ those ARs to AMP Bank representatives – we note that onboarding into AMPFP as an AR, and seeking a loan from AMP Bank required separate processes and AMP ARs were given opportunity to seek external advice.”