July 30, 2018
AMP will step up the pace at which it will remediate financial advice customers who were charged fees without receiving advice, or were provided with inappropriate advice, with future payments to customers expected to total $290 million.
In a statement released to the ASX, AMP stated it was taking a number of actions to ‘reset the business’ including an accelerated advice remediation process, reduced fees on its MySuper products and stronger risk management controls.
The group stated that it had already begun a detailed review of the advice delivered and the fees charged across its entire advice network, including its aligned adviser base but “…is moving to accelerate its remediation program to ensure all impacted customers are appropriately compensated”.
AMP noted the review was in keeping with ASIC Report 499 and Report 515 which require an industry-wide review of the delivery of ongoing service arrangements and the appropriateness of advice recommendations going back 10 years to 1 July 2008 and 1 January 2009, respectively.
“We’re facing squarely into the issues that have impacted our reputation and the community’s confidence in AMP”
The statement also revealed the expected cost of the remediation to customers, adding that net profit attributable to shareholders for the first half of the 2018 financial year “…is expected to include a provision of $290 million (post-tax) for potential advice remediation” and “…a significant portion of the provision relates to compensation for potential lost earnings”.
AMP also claimed the review program was likely to cost $50 million per annum over the next three years and it had some potential recovery options to partially offset the remediation costs in the medium term which it would actively pursue.
Despite these figures, AMP stated it expected to deliver an underlying half year profit for 2018 in the range of $490 – $500 million driven by growth in its wealth management, investment and banking businesses.
AMP Acting Chief Executive, Mike Wilkins said the announcement “…reflects our commitment to take decisive action to reset AMP and establish a platform from which the business can recover rapidly. We’re facing squarely into the issues that have impacted our reputation and the community’s confidence in AMP”.
“Our remediation provision responds to industry-wide issues raised by ASIC in its reports 499 and 515 and reflects a conscious business response to increased community expectations,” Wilkins said.
“This remediation program is complex as it will address both employed and aligned advisers, and we understand it is one of the first programs to do so,” he added.