The NSW shadow minister for finance and small business has asked what the state government is doing for advisers facing financial ruin as a result of AMP's plan to change Buyer of Last Resort terms.
Speaking in NSW parliament earlier this week, member of the opposition Daniel Mookhey asked minister for finance and small business Damien Tudehope what steps the government has taken in response to AMP advisers facing financial hardship.
After initially misinterpreting the question as being about insurance policies, Tudehope then said he understands the move by AMP to be in line with recommendations that came out of the Royal Commission.
Tudehope then said he was unsure of the government's ability to intervene in a decision made by a corporate entity as to the way it implements those recommendations.
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Asked by Mookhey to specify which recommendations he was referring to, Tudehope said he would have to come back to the shadow minister with a response.
"Often the concern raised by the Royal Commission was that financial advisers primarily were acting in the interests of the corporate entities they served rather than in the interests of the persons to whom they were selling products," Tudehope said.
"That was the key part of the concerns raised by the royal commission in relation to the advice given by financial advisers from banks and insurance companies and the manner in which they were conducting their business. Fundamentally, corporate organisations should provide to their customers a balanced approach to ensure that they were acting in the best interests of the customer."
Despite Tudehope's inability to provide an informed response, Mookhey's questioning may have done little for impacted AMP advisers anyway.
In making his argument, Mookhey referred to an editorial by AMP group executive, advice Alex Wade in the Australian Financial Review in which he commended the 600-odd advisers that recently passed the first round of FASEA exams.
However, Mookhey wrongly stated in parliament that Wade's editorial referred to "the 600 advisers that he dismissed last week or the week before" that "passed all the tests that were expected of them by all the regulators".
"Therefore, it is not correct to say it has anything to do with the Hayne Royal Commission," Mookhey said.
In concluding, Mookhey said he plans to pursue the AMP issue further with parliament.
In a statement to Financial Standard, an AMP spokesperson said: "AMP's changes to its Buyer of Last Resort terms for aligned advice practices reflect changes to business valuations due to the ceasing of grandfathered commissions and other market disruptions. We have consulted through the process as required."
As a result, those practices with a heavy reliance on grandfathered commissions will be hardest hit by the buyback changes.
"The government has legislated to bring an end to grandfathered commissions by 2021 to improve customer outcomes. AMP is turning off grandfathered commissions for the majority of products during Q1 2020 and will then continue to work with advisers to transition away from these commissions by the government's deadline," the statement read.
"We thought carefully about how to help all advice practices to address the significant disruption and regulatory change across the industry including the ceasing of grandfathered commissions."
AMP said it is committed to helping its advice practices determine the best course of action, whether that be closing, merging or selling.
Mookhey's comments in parliament follow advocacy by the Finance Sector Union which met with AMP last week to discuss the future of the group's advisers.
The FSU said it raised the concerns of salaried and aligned advisers, saying FSU members expressed anger and frustration that the announcement was made without prior consultation with AMP advisers.
"Given the impacts of these announcements on the health and wellbeing of planners and their families, FSU has expressed disappointment and concern that AMP went to market without a detailed plan on how it will inform and support planners, and that not enough is being done post announcement," the FSU said.
The FSU said it is awaiting advice as to whether the move constitutes a breach of contract and will say more once an answer is provided.
Speaking to Financial Standard recently, AMP's Wade said the group has met all of its legal obligations, consulted with the AMP Financial Planners Association two weeks ahead of the announcement and provided detailed documentation to the association as well.