Corrs Chambers Westgarth has filed an open class action on behalf of current and former AMP financial advisers in the Federal Court as anger grows over the wealth giant’s decision to reduce its adviser network and cut the amount it would pay for businesses under its BOLR terms.
“We would have preferred, and we continue to prefer, that AMPFP (AMP Financial Planning) work with the association to negotiate fair and reasonable outcomes for all members,” Advisers Association CEO Neil Macdonald. “This is obviously imperative for those who are exiting, but it is just as important to those who are staying, so that they can continue to provide Australians with affordable access to financial advice.”
Many advisers had bought businesses from AMP at four times recurring revenue on the promise that the company would buy their businesses back on the same multiple when they left under its BOLR arrangements. AMP also issued notices of termination to an estimated 250 planners that were deemed “lower profitability”, forcing them to sell their business for less than one-tenth of what they were worth before the changes.
The Australian Small Business and Family Enterprise Ombudsman has referred over 60 BOLR-related cases for mediation after receiving more than 100 complaints from AMP financial planners.
“In many cases advisers had to put up their family homes as security and are now at risk of losing them,” Mr McDonald said. “Many of our members stated they had little choice but to join the class action.”
AMP’s actions have also drawn ire from outside financial services. In late June, senator Deborah O’Neill demanded that ASIC also launch an investigation into the decision to slash BOLR valuations.
“The decision has drastically devalued the businesses of many financial [advisers],” Ms O’Neill wrote in a letter to ASIC chair James Shipton. “This was also applied retroactively to many planners who had purchased client books in good faith with this guarantee.”
However, Ms O’Neill later said that ASIC had determined “the issue was not a priority for them”. AMP responded to Ms O’Neill’s calls by saying its decision to slash BOLR valuations had been “difficult but necessary”.
“Throughout the process AMP has consulted closely with affected advisers, the industry associations and the [small business ombudsman], including participating in several mediation sessions with advisers,” a spokesperson told Investor Daily sister brand ifa. “We are providing support to advisers to help them manage the BOLR changes and make an informed decision for their future.”
AMP has said it is confident in the actions it took in 2019 and will defend the class action.
