Bank royal commission: AMP clients ‘kept in the dark’ on advice failures

An already reeling AMP has been smashed again in a day of horror at the banking royal commission.

AMP head of advice compliance Sarah Britt in Melbourne yesterday. Picture: Stuart McEvoy

An already reeling AMP was yesterday smashed again in a day of horror in which the venerable ­financial services company’s share price tumbled for a sixth day running, three class actions against it were announced, it apologised for its misconduct for a third time and the royal commission into the banks heard further damning ­evidence about its advice business.

Interim chief executive Mike Wilkins, an insurance industry veteran who stepped in to replace Craig Meller after Mr Meller resigned on Friday, spent yesterday attempting to hose down the firestorm engulfing AMP and chairman Catherine Brenner in a series of meetings with institutional ­investors.

The effort failed to stop AMP shares tumbling 3 per cent to $4.17 yesterday, bringing to $1.85 billion the amount wiped from the company’s market capitalisation since the current round of royal commission hearings opened on Monday last week.

The Money Cafe: A fresh update from the banking royal commission

For AMP, which operates the nation’s biggest network of financial advisers, investors are bracing for fundamental changes in the wealth management industry.

Terry Campbell, chairman of the country’s largest listed investment company, AFIC, which has $100 million invested in AMP, said he was shocked at evidence presented in the royal commission.

“In a general sense, and this could apply to AMP, we’ve been disappointed with what we’ve heard — and frankly surprised. Our views would not be much ­different to those of a large part of the population,” Mr Campbell said. “My experience in business has been, if you look after your ­clients, the business looks after itself. You need to take a longer-term view of business.

“Acting in the interests of the clients might not drive short-term revenue, but it will lead to larger revenues in the longer term. If you treat clients like this, they’ll never do business with you again. These advisory businesses need to ­restore trust and it will be a long process.”

UBS analyst James Coghill said AMP was facing a rebuild process of as much as ­two to three years, including “significant” senior management changes, one-off costs and considerable internal distractions.

“This is before considering ­implications of the royal commission’s ultimate findings,” Mr Coghill said.

In a statement issued last night, AMP added to apologies issued on Thursday and Friday by saying it “apologises unreservedly to its customers who have received ­inappropriate advice from advisers employed or aligned to AMP”.

“We also apologise for delays in identifying their conduct and ­remediating affected customers.”

This followed evidence at the commission revealing AMP was yet to inform or compensate hundreds of customers financially stung by dud advice handed out by the company’s advisers.

AMP’s head of advice compliance, Sarah Britt, admitted the company had not moved quickly enough in alerting customers.

“I don’t think we can argue that we’ve been timely, given we still haven’t contacted them,” Ms Britt told the commission.

Last week, the commission heard that AMP had deliberately charged customers for advice they did not receive, then misled the Australian Securities & Investments Commission about it 20 times. It also heard about pressure AMP put on law firm Clayton Utz to remove Mr Meller’s name from a supposedly independent report into the debacle and downplay the role of former advice boss Rob Caprioli.

Yesterday, counsel assisting the commission, Rowena Orr QC, took Ms Britt to three planners whose clients have yet to be told of their loss: Adam Palmer, Jennifer Coleman and a man codenamed “Mr E”.

The commission heard that Mr Palmer came to AMP’s Genesys business, which has since been shut down, in 2013. He previously worked for Australian Financial Services, which the commission previously heard had been a troubled operation that was in the process of shutting down at the time — provoking a feeding frenzy in the industry as players attempted to snap up ­lucrative client books bulging with soon-to-be-banned trailing commissions.

In addition to his time at AFS, which ASIC had hit with fresh ­licence conditions in 2011, a client of Mr Palmer’s had been compensated after a Financial Ombudsman Service complaint because he tipped 10 per cent of their portfolio into Basis Capital, a hedge fund that melted down in the global ­financial crisis because of its ­exposure to US subprime mort­gages.

Company documents filed with ASIC show that in 2013 Mr Palmer also became a director of and the 60 per cent shareholder in a company called Property Saint.

His first audit earned him an E mark — a fail and the worst available rating — and discovered that “all SMSF clients are referred to an Eddie in this business”.

He steered at least 10 clients into dealing with Property Saint, the commission heard.

Genesys terminated him in ­August or September 2014 but ­decided not to refer Mr Palmer to ASIC in November that year. He was not reported until July 2015.

Clients were offered an “advice review”, but no remediation.

They have still not been compensated, Ms Britt admitted.

Under questioning from Ms Orr, Ms Britt had difficulty accepting that Mr Palmer’s conduct was dishonest, even though AMP called it that when it finally got around to telling the regulator.

“There was no evidence of ­actual dishonesty” at the time she prepared her statement for the commission earlier this month, Ms Britt said. “But I accept obviously that it is a matter of grave concern that the adviser hasn’t disclosed his interest in this property business.”

ASIC documents show Mr Palmer remains registered as a ­financial adviser at smaller group Dover, making the second planner about whom evidence has been heard at the royal commission registered as a representative there.

Mr Palmer, who runs Victorian thoroughbred farm Princess Park and racing business network Final Field, could not be reached last night.

Ms Coleman, who specialised in insurance, became an authorised representative of one of AMP’s planning arms, Charter, in October 2009.

The commission heard she ­repeatedly told clients that new ­insurance she recommended would be cheaper than their ­current cover when in fact it was more expensive.

In consecutive audits she ­received three D ratings — the second-lowest possible — before resigning in July 2016.

About 100 clients may need to be remediated, Ms Britt said.

“As far as I am aware, no, no specific provision has been made in relation to Ms Coleman or her clients,” Ms Britt told the com­mission.

The commission heard that Mr E had a penchant for rolling his victims into the group’s superannuation products, sometimes costing them thousands in exit fees from the funds they were leaving.

He joined AMP Financial ­Planning in December 2015 and in September the following year earned a C rating on his audit, meaning major areas required ­improvement.