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'We preferenced interests of shareholders at the expense of clients': AMP

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Trust in Australian big financial planning firms will never be the same after the bombshell evidence at the banking royal commission.

Not only were customers misled, overcharged and paid millions of dollars for services they never received but AMP, one of Australia's oldest and largest financial firms, misled the regulator, the Australian Securities and Investments Commission (ASIC), with at least 20 false statements.

As well it was revealed that the outgoing AMP CEO, Craig Meller, and chairman, Catherine Brenner, interfered with an independent report to ASIC.

amp retail superannuation funds royal commission

Michael Hodge, counsel assisting the commission, shone a light on how AMP customers are largely being channelled into in-house AMP investment and insurance.

This is despite the introduction of the FOFA legislation in 2012 setting out that financial advisers have a duty to act in the best interests of their clients and banning conflicted forms of remuneration.

But every year since 2013, 70% of new customer funds were invested in in-house AMP products, even though they only make up 35% to 40% of AMP's approved product list.

Since 2013, 90% of new customers invested in one of AMP's in-house products or paid insurance premiums to AMP.

AMP lost $600 million off its share price on the Tuesday after the shocking revelations.

The banking royal commission is lifting the lid on how the regulation of financial planning has clearly failed Australian investors and questions the safety of using a financial planner.

When ASIC's Peter Kell took the stand, he told the hearing ASIC has 60 staff to investigate the conduct of 25,000 financial planners.

Kell says a recent investigation by ASIC into SMSFs found that nine out of 10 times financial advisers gave advice to SMSFs that was not in their best interests

Fees for no service by financial planning firms was summed up by Commissioner Kenneth Hayne as: "Selling what you can't deliver, selling what you won't deliver and selling what you don't deliver."

commissioner kenneth haynes royal commission banking financial services advice planning

The five firms are paying out a combined $216 million in refunds to more than 300,000 customers who were charged fees for financial advice services that they never received.

AMP's group executive for advice Anthony "Jack" Regan admitted to the commission that the company had misled ASIC by presenting fee-for-no-service as a mistake, when there was a deliberate policy to charge customers fees for 90 days even though they received no advice services.

What's more AMP repeatedly ignored advice from its lawyers Clayton Utz about the correct complying behaviour. It reworked so called "independent" documents that were sent to the regulator ASIC.

"What we seem to be seeing is that a conscious decision is made to protect the profitability of AMP at the expense of complying with AMP's licence, do you agree?" asked Hodge.

"Yes, I believe that's what that shows," answered Regan.

The AMP executive then admitted that the practice of charging customers fees for 90 days when they were receiving no services showed that the customers' interests were not always put first.

"It's clear that we preferenced the interests of shareholders, in that exchange, at the expense of clients, and so that is a concern," he said.

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Susan has been a finance journalist for more than 30 years, beginning at the Australian Financial Review before moving to the Sydney Morning Herald. She edited a superannuation magazine, Superfunds, for the Association of Superannuation Funds of Australia, and writes regularly on superannuation and managed funds. She's also author of the best-selling book Women and Money.
Comments
Ros
April 19, 2018 6.20pm

Who do you approach to find out if you're a victim?

Money
Verified
April 20, 2018 7.13am

Hi Ros,

You can make a public submission to the royal commission here: https://financialservices.roya...

- Money team

Ian Grant
June 18, 2020 11.24am

Great article.

I am Executor of my late parent's Estate. Their financial affairs were exclusively controlled by a Financial Planner. They started off with $1.7m. 13 years later there was less than $1m left. Planner would not willingly hand over records unless paid well over $10K. Planner retained a top lawyer to fight me every step of the way. So I paid the fee and merely got several hundred pages of uncollated PDF files. I discovered the planner has charged well over $300,000 in Planner Fees, most of which were never agreed to by the PofA and 'extra' fees on top of those agreed in the Fee Disclosure Statement. In the first year, the planner charged over $50K to manage a small share portfolio. No annual reviews were ever undertaken except for a simple "Snap Shot" document produced only 6 times. No Fee Disclosure Statement was ever sent (a post FOFA requirement). Pure Age Abuse as my parents were in their 80's when becoming "Clients". It's a mess.

My info gathering is now complete. Who do I take this info to to get redress?

Money magazine
June 18, 2020 12.53pm

Hi Ian,

We're sorry to hear that.

You can make a complaint to the Australian Financial Complaints Authority here https://www.afca.org.au/make-a... or by phoning 1800 931 678.

Good luck!

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