A class action has been filed against AMP by its own advisers in relation to the institution's decision to slash Buyer of Last Resort valuations last year.
Almost one year on from the news BOLR valuations would be cut from 4x recurring revenue to a maximum of 2.5x, Corrs Chambers Westgarth filed an open class action against the wealth giant in the Federal Court of Australia on behalf of AMP Financial Planning advisers.
The action was initially expected to be filed late last year, but was delayed due to new regulation relating to how class actions are funded. It was then expected to be filed in February but was delayed again.
It comes as the Australian Small Business and Family Enterprise Ombudsman refers numerous BOLR-related cases for mediation on the back of more than 100 complaints, and calls for a review of AMP's behaviour by Labor Senator Deborah O'Neill.
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It also follows recent comments by AMP chief executive Francesco De Ferrari that the prevalence of class actions in Australia is driving up the cost of public indemnity insurance and of doing business here. AMP is currently facing two other class actions.
Speaking to Financial Standard, The Advisers Association (TAA) chief executive Neil Macdonald said its AMPFP members are relieved the action has been filed.
"A lot of our members are just shattered, essentially. It's taken a long time, they were hoping that the Small Business Ombudsman would be able to assist and that AMP would be reasonable," he said.
"For many of them, it's been both physically and emotionally exhausting.
"Unfortunately, the reality is any legal action takes time and that's problematic for small business owners."
He said, best case scenario, the class action will take 12-18 months but TAA members are prepared for the fact it could stretch anywhere up to two years or more.
Unfortunately, for those currently going through the exit process or were given their notice last August or September, what happens to them while the action is ongoing depends on their individual exit process and documents required by AMP, which can change from adviser to adviser.
"As a result they will need to get their own legal advice to understand if they can continue to be part of the class action or not when they sign their release documents," Macdonald said.
He reinforced that the TAA and its members view the class action as a last resort, saying the preference is always to negotiate fair and reasonable outcomes which, so far as the BOLR changes go, AMP has not been open to.
However, having met with AMP regularly since November last year, Macdonald said the group has recently been open to discussing the "slow and protracted" exit process that advisers are required to go through and prepared to look at ways to improve it to ensure it's fair and efficient for everyone.
Responding to the action, AMP said it is confident in the actions it took in 2019 and will defend the proceeding accordingly, believing they are in the long-term interests of clients and advisers.
Referencing the ongoing transformation of the advice industry, the group said: "AMP has made difficult but necessary decisions to ensure we adapt to the new environment and continue to have a strong, viable advice business for clients."
"We recognise the changes are challenging for many in our adviser network, and we're providing support to our advisers to help them manage the transition, including those who support the class action."
"They're confident they're right, we're confident they're wrong. The law will decide," Macdonald said.
"You don't take legal action unless you think you can win."