ASIC has begun court proceedings against AMP Financial Planning (AMPFP) alleging some of its advisers engaged in conduct to rewrite life-insurance business to receive higher commissions, and so breached their best interest duty obligations.
In the proceedings, which will take place in the Federal Court of Australia, ASIC will allege that some AMPFP advisers engaged in ‘rewriting conduct’ where they provided advice that led to the cancellation of an existing policy and its replacement by a similar but new policy application, instead of a transfer.
ASIC stated the advisers involved would have received higher commissions under this process and also unnecessarily exposed their clients to underwriting risks, and this type of of advice was inappropriate, failed to act in the best interests of the clients, and failed to prioritise the interests of the clients.
The regulator will also allege that AMPFP failed to ensure its authorised advisers complied with the best interests duty and related obligations under the Corporations Act.
Specifically, ASIC will contend that by 1 July 2013 AMPFP knew or ought to have known that its advisers were at risk of, or actually, engaging in rewriting conduct and the detriment this conduct caused to the clients, but, in the period from 1 July 2013 to 30 June 2015, failed to take reasonable steps to deal with the conduct.
To support its claims, ASIC will call upon sample client files of current and former AMPFP authorised financial advisers in which it alleges rewriting conduct occurred, including those of former adviser Rommel Panganiban, who was permanently banned by ASIC in September 2016 (see: ASIC Permanently Bans Adviser For Churn).
ASIC stated the adviser conduct was in breach of section 961L of the Corporations Act, which is a civil penalty provision, and attracts a maximum penalty of $1 million per contravention.
The proceeding is listed for a directions hearing in Sydney on 27 July 2018 and is separate from an ongoing investigation into AMP in relation to fees for no service conduct and in relation to the making of false and misleading statements to ASIC.
This is the second civil proceedings case launched by ASIC this month, with the regulator having also begun proceedings against Westpac, alleging breaches of best interest duties (see: ASIC Begins Court Proceedings Against Westpac Over Poor Advice).
Rommel was banned by AMP in 2014 when they discovered this and ASIC penalised him in 2016. Was Rommel working for lionsgate straight after. What screening did they conduct?. AMPFP reported him to ASIC on discovery.
Rommel was relived of his duties with AMP, then worked for Lionsgate (sole trader) all the way up to the time ASIC banned him.
Hmmm…with one life office this year [not AMP] I had a new client transferred from the previous adviser who had written the business many years ago for 100%+ upfront commission. I only undertook a change of ownership, from ‘ordinary’ to ‘super’. Of course, a new super owned policy had to be issued replacing the non-super owned policy. Instead of receiving the expected $280+ renewal commission, I received $2,800+ initial commission. I contacted the life office & was told – ‘this is just what happens with these very old policies.’ Dutifully, I advised the client and offered them a commission rebate of $2,320 which they readily accepted! A whole 3 months later, said life office wrote back the entire initial commission payment & then paid me my $280+ renewal commission. What a great client, they understood & EFT back the $2,320 rebate. The life offices with their antiquated systems and legacy policies are a disaster waiting to afflict any unwary adviser. Thus, I am not convinced every policy replacement [for whatever reason] that results in new business commission being paid, was intended to be so from the adviser perspective. This said, it’s what you next do that separates you from the ‘cowboys’ out there.
What an ugly mess this could be ! There are more reasons to move a client then cost
If you can get a better premium fine but it must be more then just that
The client likes the idea of cost saving and so they should but at what cost to benefits The issue here is better costs and better benefits they go hand in hand and as long as you can provide proof of it then you are in my opinion working in the best interests of your clients
Read your PDS. Details and save yourself a lot of heartache when ASIC asked why did you change them over and you can say because overall they are better off due to reason 1 2 3 and maybe even 4 ?
Legal Action ????WTF…..pull their licence like you did with Dover etc…..
These ASIC findings really concern me.
When Best Interests Duty first came out, advisers technically had a legal obligation to leave clients in a better position than when we found them at review time. In many cases, via life companies jostling for #1 position, this meant offering clients less expensive and higher quality (via improved definition) policies – where they were able to implement them.
Now, ASIC state we only do it to line our pockets. I absolutely detest this.
No-one works for free. The vast majority of us do our best to help our clients yet ASIC continually label us as thieves and crooks – which is just not true.
I appreciate if there was ‘systematic re-writing’ it should be pinged, but it seems to me that this totally left-wing focused regulator won’t be happy ’til it’s lynched every damn adviser out there.
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