Senator calls for AMP probe as planners' debt soars

Labor Senator Deborah O'Neill has asked the Australian Securities and Investments Commission (ASIC) to investigate wealth giant AMP for changes to contracts with outgoing financial planners that have put scores of them in debt.

AMP changed the terms and conditions of long-standing arrangements with its financial planners in August last year, with the move reducing the value of advice businesses by more than one-third.

Under the previous arrangement known as the buyer of last resort (BOLR), AMP would purchase client books of retiring advisers for four times the annual revenue but this was reduced to 2.5 times in an effort to cut costs.

In a letter to ASIC chairman James Shipton sent Wednesday evening, and obtained by The Age and Sydney Morning Herald, Senator O'Neill called on ASIC to investigate the impact of AMP's policy change on planners.

Senator Deborah O'Neill has asked ASIC to investigate AMP over a policy change that has put hundreds of financial planners in debt.Credit: Dominic Lorrimer

"This decision has drastically devalued the businesses of many financial advisors. This was also applied retroactively to many planners who had purchased client books in good faith with this guarantee," the letter said.

Senator O'Neill said around 250 planners had been fired since August after AMP said it was focusing its financial advice on the most profitable elements of the business by using "fewer, more productive advisers".

According to Senator O'Neill, the move had put pressure on financial advisers to sell businesses for less than one tenth of the value prior to the BOLR changes.

Philip Kewin, chief executive of the Association of Financial Advisers, said the coronavirus pandemic combined with greater education requirements had put increased pressure on planners to exit the industry.

Senator O'Neill also said the Australian Small Business and Family Enterprise Ombudsman had received over 100 complaints from AMP financial advisers related to the BOLR changes.

An AMP spokesman said the decision to change the terms of the contracts was "difficult but necessary" following changes to legislation following the Hayne royal commission. "This includes the removal of grandfathered commissions, new mandatory education standards, and new regulations around advice," the spokesman said.

The Finance Sector Union national assistant secretary Nathan Rees said AMP's policy change had affected over 1000 financial planners and the impact had been "very significant" with some filing for bankruptcy and others losing homes.

"It's just an outrage. People genuinely thought this was an asset and planned against having that asset around the price of sale that they thought was agreed," Mr Rees said. "The rug has been pulled out from underneath them."

Mr Rees said the FSU had sent letters to AMP directors but "there's been a resounding silence".

"This is an extraordinary way to treat their own staff [aligned advisers]," he said. "AMP should go back to the original plan and execute the contract in good faith."

An AMP spokesman said the wealth giant had hosted 30 mediation sessions with advisers to share information about the changes.

Law firm Corrs Chambers Westgarth is investigating a class action over the matter as hundreds of planners have been impacted financially. However, AMP Financial Planners Association chief executive Neil Macdonald said an outcome for this could take years.

"The challenge is these are small business owners. Legal action will take two or three years by which time they are not able to work and are having problems repaying their loans," Mr Macdonald said.

Senator O'Neill has requested ASIC prepare a report on the matter to present at the joint financial services committee hearing on July 13.