August 9, 2019
AMP Financial Planners Association have announced they will be contesting changes to AMP’s Buyer of Last Resort terms.
AMPFPA CEO, Neil Macdonald, says, “AMP is contractually obliged to consult with us over changes to the terms and also to give our members 13 months’ notice of any change that will have a detrimental effect on them. AMP has done neither.”
Macdonald added AMP’s pinning of BOLR to what it claims is market value of 2.5 times is disingenuous.
“Advisers had to pay four times recurring revenue to buy into the right to service an AMP client book. That was the price set by AMP. It was never a market value,” he noted.
“The adviser did not own the client book or any goodwill and would never have paid four times without AMP’s promise to pay four times when the adviser retired from the industry. This was AMP’s mechanism to attract and retain advisers long term. But now, AMP is wanting to keep the four times entry price for itself and only pay back 2.5 times.”
Macdonald continued that AMP has now broken trust with its own customers and its own people.
“The reduction of the multiple applied under the BOLR terms is potentially disastrous to many advisers, particularly those who have given notice but have not yet been bought out.”
Overnight, many advisers who have invested four times recurring revenue and provided years of service to AMP and to their clients, have seen the amount promised by AMP on exit decimated.
“These are typically small business people on the brink of retirement who may now be forced onto Centrelink benefits when they exit.”
Another concern of the association is about AMP advisers who have been induced into debt by AMP to buy books from exiting AMP advisers at four times recurring revenue.
“In many cases advisers had to put up their family homes as security.”
“These were valued by AMP for lending purposes at four times recurring revenue and in most cases the purchase was funded by loans from AMP Bank or another tripartite banking arrangement, again at four times recurring revenue,” said Macdonald. “In many cases advisers had to put up their family homes as security.”
He added some advisers will find repaying the loans extremely difficult and could lose their homes or face bankruptcy.
“We are concerned about the potentially devastating flow-on effect of the financial loss in terms of the mental health of advisers, their families, and their staff, as well as the impact on their clients. What will happen to the clients of the advisers that AMP forces to move on, advisers who cannot, due to AMP imposed restraints of trade, work in the financial services industry for at least three years?”