AMP admits to serious misconduct in RC submissions

AMP has acknowledged hundreds of instances of misconduct in relation to the provision of financial advice between 1 January 2008 and 30 June 2015.

In opening the Royal Commission's inquiry into financial advice today, Senior Counsel Assisting Rowena Orr provided a summary of the three submissions made by AMP and related entities.

Orr said AMP acknowledged it has engaged in conduct that it characterised as "possible misconduct or conduct falling below community standards and expectations."

AMP made a series of acknowledgements of possible contraventions of the Corporations Act and the ASIC Act in relation to fees for no service.

Orr said AMP acknowledged 196 events across 14 of its advice licensees where advisers failed to provide customers with services for which they had paid. The events took place between 1 July 2008 and 30 June 2015, and resulted in $193,519 being paid in compensation.

The institution acknowledged a further six events which involved an AMP licensee continuing to charge customers ongoing service fees despite no services being provided.

Orr first highlighted instances in which service fees were still charged after the client's adviser sold the rights to the service and the right to be paid by the clients to an AMP licensee under a BOLR arrangement.

"Upon acquisition by the licensee, the clients were placed into a central pool. For so long as the clients remained in the central pool, they did not receive services but AMP licensees continued to charge fees to approximately 14,000 clients in this pool," Orr said.

In some cases, this occurred because of a systems error, but in others it was because AMP applied an internal business rule that clients could continue to be charged fees for up to 90 days. In rectifying this, about $3.69 million has been repaid to customers.

Further examples acknowledged by AMP and cited by Orr include instances where clients were charged ongoing fees for no service where the client's adviser had departed AMP and AMP opted to "ring-fence" those clients.  As at 13 February 2018, about 10,685 affected customers have been identified and $1.08 million will be repaid.

Customers were also charged ongoing service fees after their adviser's authorisation had been terminated. As at 13 February 2018, 3108 customers had been identified as affected and about $1.2 million paid in compensation.

AMP also acknowledged possible misconduct in relation to its reporting to ASIC of its charging of fees for no service. Orr confirmed that AMP's conduct in relation to fees for no service would serve as a case study later in the advice hearings.

Further, AMP acknowledged that since 2009 it has identified 81 advisers with potential serious compliance concerns. In the same period, AMP has identified 440 advisers with potential other compliance concerns, including breaches of internal business rules or standards resulting in adverse audit results or financial losses by clients.

"Inappropriate advice by 14 advisers between 1 January 2009 and 30 June 2015 had resulted in compensation being paid to 1079 customers. The amount of the compensation was not provided," Orr said.

AMP further admitted to advisers engaging in "insurance rewriting" misconduct, whereby authorised representatives recommended to a client to cancel their existing AMP life insurance policy and purchase a new AMP life policy, enabling the adviser to collect the maximum rate of upfront commissions.

According to AMP's submission, one former adviser did this 57 times in respect of 49 clients. For this, seven customers have so far received $61,777 in compensation. While ASIC's investigation into this is ongoing, five other advisers have been identified as guilty of the same conduct and two have consequently been banned.

Orr said AMP provided a supplementary submission identifying 126 advisers for further possible misconduct. Of these advisers, AMP identified only one as currently being involved in its remediation program. Three of the advisers were described by Orr as "giving rise to serious compliance concerns" and will also serve as a case study later in the hearings.

AMP currently has about 2800 advisers working across 1500 practices; more than half are licensed with AMP Financial Planning, with about 1000 licensed through Charter Financial Planning or Hillross Financial Services.

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*This story was updated at 5pm.

Read more: AMPASICfinancial adviceRoyal Commissionfinancial planningAMP Financial PlanningCharter Financial PlanningHillross Financial ServicesRowena Orr
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