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AMP approved product list under fire

The approved product lists AMP financial advisers are beholden to have come under fire from the House of Representatives Standing Committee on Economics.

Labor MP Andrew Leigh questioned AMP chief executive Francesco De Ferrari on how the institution has changed since the Royal Commission.

Leigh acknowledged that AMP was hit hard by the Royal Commission, saying: "You used to trade over $5, now you trade below $2."

He then asked whether it was true that companies have to pay $22,000 a year to be on an AMP approved product list.

Leigh was not clear on his source for the $22,000 figure, and a spokesperson for AMP has since told Financial Standard there is no fee to be on an AMP approved product list.

"We roughly have a little more than 1000 products on our approved product list, 60% of those products are external. Our commandment is to provide clients the best products for what they require," De Ferrari said.

He was then interrupted by Leigh who suggested Ferrari did not appear to be answering his question.

De Ferrari answered that clients pay a higher admin fee, of 13 basis points, to access non-AMP products on the MyNorth platform.

"So you need to pay more to avoid getting just in-house product?" Leigh asked.

"That is correct, and advisers would decide whether it is in the best interests of clients to have an extensive product range or a more limited product range," De Ferrari said.

However, whether fees are charged to product providers to be on AMP's MyNorth platform is a separate issue to the approved product lists.

There are products available on MyNorth which are not on the AMP approved product list. MyNorth is not exclusively used by AMP financial advisers.

Financial Standard understands there were fee arrangements between AMP's platform and product providers prior to the Future of Financial Advice reforms and some of these arrangements still exist as grandfathered fees. These will be turned off by 1 January 2021.

Questioning from the politician then turned to recent revelations that AMP opened new superannuation accounts in customer's names to repay fees charged to them for no service as part of its remediation program.

"Isn't this adding insult to injury, rather than sending the client a cheque?" Leigh said.

De Ferrari said it was not possible to send a cheque due to the fees being taken from the tax advantage environment of their super fund.

AMP has 92,000 Eligible Roll-over Fund accounts with an average balance of $11,000, De Ferrari said, but  could not confirm how many of those accounts were set up to remediate clients for fees charged.

Leigh asked AMP to take on notice how many new ERFs were opened "to repay the ill-gotten gains".

Meanwhile, Labor MP Daniel Mulino asked for an update on AMP's remediation program.

"I believe we have one of the best remediation programs in the industry," De Ferrari said.

"We estimated that the total spend of our program, which is due to complete in 2021, would be $800 million."

He added that as of the end of May AMP had remediated 62,000 clients and spent a total of $241 million to achieve that.

De Ferrari said that where clients were to be remediated less than $400 AMP pays that without going back to the file to check as running the process is more expensive than paying out.

Read more: AMPMyNorthRoyal CommissionFrancesco De FerrariFuture of Financial AdviceLabor MP Andrew LeighLabor MP Daniel Mulino
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