AMP hit with penalty following BOLR class action

Justice Mark Moshinsky has ordered that AMP pay Equity Financial Planners, the lead applicant in the Corrs Chambers Westgarth-led class action, $814,944.76 and over $151,000 in interest.

Sample group member, Wealthstone, will receive $151,533.51 and just over $17,000 in interest. Wealthstone’s contract in AMP’s BOLR scheme has also been voided by the Federal Court.

AMP has 28 days to pay the respondents.

In July, the court ruled Equity Financial Planners and sample group member Wealthstone suffered losses of $813,560 and $115,533 respectively, when the August 2019 changes were made.

Under those changes, AMP cut payments to financial planners under its AMP Financial Planning (AMPFP) umbrella to 2.5 times the value as its ongoing revenue. Prior to the changes, the rights were valued at four times the sum of its ongoing revenue.

Its grandfather revenue plan was also changed from four times to 1.42 times, with a further plan to continue reducing the figure per month until it reached zero by January 2021.

There was evidence the changes had been made in light of the market environment following the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

The changes also impacted those who submitted a BOLR application prior to the changes, which meant they had to continue under the new figures and could not withdraw without AMPFP’s consent.

In July, following the Federal Court’s decision, AMP released an ASX statement that it was reviewing its options.

“Noting the complexity of the matter, AMP is reviewing the judgment in detail to determine the full effect of the judgment and its next steps. AMP will provide an update in due course,” it said.

'Dire consequences'

Speaking to ifa in July, the head of policy at the Financial Advice Association Australia (FAAA), Phil Anderson, explained that the banning of grandfathered commissions and AMP’s changes to the buyer of last resort scheme have had “dire consequences” for countless advisers. While the first saw the benefit of any conflicted remuneration payable under a contract passed on to the client, and the second considerably diminished the value of advice practices, together these changes significantly impacted the retirement income of many advisers.

“I had a number of conversations with people who did it really tough at that time. Many of them have ultimately left. But their retirements will be seriously impacted by the combination of those two things,” Mr Anderson explained.

Commenting on the culmination of the court process following the ruling in July, Mr Anderson said that it should bring some relief to those impacted.

But while a portion of lost funds may be recovered, he stressed at the time that the emotional toll these changes had on advisers should not be understated.

“Some put themselves into bankruptcy. Some had substantial mental health challenges and there are a lot of people that had to do what they could to help their colleagues through this process.”

The damage, he reiterated, was “substantial”.

“I’m pleased that this decision will help to remedy some of the consequences that many have experienced. We hope that this can be finalised rapidly and that that works, I guess, to address what has happened in the past but also to facilitate the advice process in moving forward.”