AMP has yet to notify clients they may have received inappropriate life insurance advice as it was still reviewing the files of a number of advisers, a senior AMP executive has told the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
Appearing before the Commission, AMP Head of Advice Compliance, Sarah Britt said AMP had allocated more resources to review client files and compensate clients if necessary but was working through a large number of cases.
“I think historically we have underestimated the task ahead of us. And I think as an organisation we have to own that, and there has been a huge effort to restructure and reset the program going forward so that it is adequately resourced,” Britt said.
Her comments were made in response to questions from Counsel Assisting the Commission, Rowena Orr, QC as to why the clients of two advisers had not been told they may have received inappropriate advice and might be compensated for suffering financial loss.
Orr was referring specifically to clients of an adviser known as Mr E and a former Charter Financial Planning authorised representative, Jennifer Coleman, who both provided advice that was considered inappropriate and subject to review and audit by AMP.
“It’s that there are a number of advisers in the remediation program, and that certainly his [Mr E’s] clients will be looked at and the customers will be remediated if they’ve suffered financial loss,” Britt said.
“The process is that we will look at the entire book together and write out to all clients at the same time”
“The process is that we will look at the entire book together and write out to all clients at the same time,” she said, adding this would be the same process used with up to 100 of Coleman’s clients.
The Commission heard that Mr E’s entire book of business was under review and that in one instance he provided life insurance advice, as part of a wider financial plan, which was more expensive than what was held by the clients prior to receiving the advice.
The advice also resulted in the client being without cover for three months and suffering loss due to exit fees as part of a rollover from a superannuation fund.
Coleman, meanwhile, had recommended life insurance to clients that was supposedly cheaper by around $1,000 per annum but the new premium fees were actually higher, and also failed to tell the clients that exit fees would apply to their superannuation fund from which the premiums would be drawn.
Coleman also failed to disclose she might receive an activation payment for one of the products that she recommended, failed to document the scope of advice, and failed to document the couple’s needs and circumstances.
Britt said Coleman had ranked very low in a succession of audits and her authorisation was revoked in September 2016 and the provision of inappropriate advice was due to Coleman’s over-reliance on support staff and failure to take overall accountability for processes and procedures.
Britt defended the audit process stating that it had detected problems with Coleman’s advice and “…there was a pattern of conduct and it is apparent that she wasn’t capable of providing good quality advice. But AMP had the appropriate systems and processes in place to detect her and ultimately to terminate her”.
I would have thought that for Life Insurance only advice, it would have been more efficient, with less time and cost impost on all involved and to create more integrity into the investigation of the advice given, would be to first offer all the clients a free review from an experienced adviser, rather than having a compliance person with little or nil practical experience, reviewing historical paper trails that does not bother to involve the clients themselves.
The adviser can ask the clients what they thought of the advice and process as part of the review and then make updated recommendations that could take into account what occurred at the previous client meetings, without a theoretical assumption of guilt because one of hundreds of rules was not followed to the letter of the law.
I can tell you now and even though no lawyer would admit to it, if forensic investigations into all lawyers past work was conducted, there would be very few who would pass the maze of rules that are part and parcel of the whole legal and compliance system, yet many would scream to the rafters about unfair practice if the tables were turned back on them.
There is a vast difference between theoretical and real world advice.
The lawyers and compliance guru’s including auditors, are hypocrites if they say otherwise.
@Jeremy Wright,
Mate you are completely wrong in most of your assertions.
Most clients wouldn’t know that by switching products by an adviser that it’s is in their interests if the adviser doesn’t tell the whole story.
First off, the client relies on the basic tenements of advice by the adviser,….. Know your client and know your product.
No reasonably intelligent adviser should ever suggest a client switch insurances without first …….
1. Arrange for the client to have a full medical, so there nothing lurking as unseen or not disclosed.(PMAR)
I’m aware that AMP compliance are strong on this issue. Think of a recent case of non disclosure by a client that resulted in a $750,000 PI claim against an adviser who didn’t do his due diligence when switching a client.
2. I don’t know how your compliance works but ASIC say, all benefits lost or gained upon switching need to be disclosed.
3. All costs including fees/commissions in dollars and %ages need to be disclosed.
4. What other or alternate products/insurance were considered ?
5.What was the reasonable basis for the final recommendation ?
6. How was the level of cover determined ?
If any of that is missing in the SOA to start with, or the client file any compliance person could work that out without engaging the client.
By the way I am not an AMP adviser but I am licensed under an independently owned AFSL.
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