AMP has admitted that its Buyer of Last Resort measures, up until June 2017, were designed to incentivise financial advisers to show preference for its in-house platforms.
Giving evidence on the first day of the Royal Commission's inquiry into financial advice, AMP group executive, advice and New Zealand Anthony Regan admitted the BOLR policy held by AMP between 1 July 2012 and 30 June 2017 stated that advisers selling client books to their licensee had to meet specific criteria in order to do so.
Under the BOLR policy, an AMP licensee would only acquire a client whose products were on the licensee's approved products and services list (APSL).
With sales under BOLR measures generally valued at four times rolling business revenue, Senior Counsel Assisting Michael Hodge said: "You would only be paid the multiplier on revenue or indeed paid anything if that client's products were on the APSL."
In response, Regan said that he was unsure, despite the BOLR policy clearly stating that it is not applicable to products not on the APSL.
Further, where a product was on the APSL but the related product was not an AMP platform, the combination is considered to not be on the APSL.
"Is that your understanding of how the policy worked or do you not have an understanding of how the policy worked?" Hodge asked Regan.
"I don't have a detailed understanding of how the policy worked. I've never had a material role in the operations of the policy," he responded.
Hodge pressed on, addressing the issue of platforms on AMP's APSL being largely limited to AMP's own offerings.
"Can I suggest that that provides quite a strong incentive for the adviser to place a client on a platform that is on the APL?" Hodge asked.
Regan replied: "Yes, noting that was in 2012. I cannot be sure that there was no other BOLR policy between 2012 and 2017."
However his evidence stated otherwise, acknowledging that the BOLR policy dated 1 July 2012 was only superseded when the June 2017 policy came into effect.
Hodge also questioned Regan in relation to concerns raised upon his appointment to his current role in 2017. Citing Regan's evidence, Hodge said it became apparent to Regan in 2017 that there were significant problems with the governance and oversight of AMP's advice business.
One such example was issues that arose out of an internal business rule that clients could continue to be charged fees without service for up to 90 days. AMP's own internal legal team advised the relevant AMP staff that there was no legal basis for such a rule.
When asked by Hodge whether that came as a surprise, Regan said: "No, it's not a surprise that it's not lawful. It's obvious."
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