17th Apr 2018
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Revenue not advice the priority for AMP
Author: Janelle Ward
Revenue not advice AMP’s priority

AMP misled the Australian Securities and Investments Commission (ASIC) at least 10 times over seven years, charging tens of thousands of customers fees for services that were not delivered.

AMP’s financial advice division chief Jack Regan, who assumed the role in January last year, told the financial services royal commission on Monday that it was “basic ethics and morality” not to charge people for something AMP knew it was not going to provide.

Yet that was what AMP did to almost 29,000 customers after financial advisers sold their client lists to AMP. Affected customers have either been paid or promised compensation, but AMP and ASIC are still investigating.

 


The royal commission is wading through long lists of admitted cases of misconduct by the Big Four banks and was told yesterday that AMP ignored legal advice that charging its customers for services they did not receive was unlawful.

AMP has admitted making 10 false statements to ASIC and admitted it provided incentives for external planners within its network to sell customers AMP products.

Mr Regan, who faced a torrid time at the inquiry on Monday, said an AMP review of its processes found that staff had approved the ongoing charging of fees against legal advice.

ASIC Chairman Peter Kell said on Monday that many businesses had prioritised revenue over advice.

“I think it’s clear from our experience that the firms in question prioritised fee revenue from their advice businesses over the provision of services to clients,” Mr Kell said.

"We found in all the instances that the systems that underpinned the ability to collect revenue were better developed than the systems that ensured the client received the advice service."

On a separate front, two key financial advice bodies are at war on qualifications.

Over the next two weeks, Commissioner Kenneth Hayne will hear about financial advice complaints involving Westpac, CommBank, ANZ, NAB and AMP. At the same time, the Financial Planning Association (FPA) is fighting moves by its standards body to revise basic education requirements, describing them as a backward step.

Senior counsel Rowena Orr QC said there had been a big increase in the financial advice sector in recent years.

The number of financial advisers had jumped from about 18,000 in November 2009 to more than 25,000 – a 41 per cent rise, she said. However, according to information given to ASIC, only about 35 per cent had a relevant university degree or higher qualification.

Revised minimum education requirements are set to come into force in January with new financial advisers requiring a relevant university degree. Existing advisers will be given time to complete a relevant degree if they haven’t already done so.

A new code of ethics will also come into force on 1 January, 2020.

A bid by the Financial Adviser Standards and Ethics Authority (FASEA) to revise education requirements has been slammed by the FPA.

FPA chair Neil Kendall said members were outraged that FASEA planned to recognise a law degree as a relevant financial planning qualification.

“The FPA and many others in the financial planning profession have spent 20 years building a culture of learning among planners. These announcements by FASEA and a refusal to acknowledge the study done in advanced diplomas and the Certified Financial Planner program will undermine that learning culture if it is not reviewed,"  he said.

“A financial planner with a business degree, eight subjects in the advanced diploma, and five Masters level subjects in the CFP program is treated as unqualified in the latest FASEA proposal, but an existing planner with a law degree only has to complete a non-technical bridging course to meet the standard.”

The matter was the subject of an FPA questionnaire issued to its 13,700 members last week.

Do you use a financial planner? Were you satisfied with his or her qualifications?

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    COMMENTS

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    mike
    17th Apr 2018
    11:07am
    I've had problems with AMP overcharging me for years,since they took over fron GIO, whom I was happy with, but had no choice re the change. The trailing commission was one fee I objected to, no response, and I never used the 'advisor' assigned to me as he was clearly only interested in himself.
    Old Geezer
    17th Apr 2018
    11:21am
    Why are you still invested with them?
    Rae
    17th Apr 2018
    12:48pm
    I'm surprised you didn't transfer to a new company. There are plenty of good Industry Funds out there. I suppose if you purchased an annuity you may be stuck.
    Old Geezer
    17th Apr 2018
    2:51pm
    I am too.
    BrianP
    17th Apr 2018
    11:16am
    The practice of "Ripping off" people in Australia has become so entrenched in business that our whole society is failing. Vulnerable and poor citizens are victimised and growing in number.

    What an indictment of Government failure. They are supposed to protect and improve quality of life here. They have failed. And all they have achieved is widening the gap between rich and poor.
    Old Geezer
    17th Apr 2018
    11:21am
    It is simpler than that. People have forgotten the fundamental rules of investing money. If it's too good to be true then it's best left alone not I know nothing about this but I'll trust you. If you don't understand something simply don't invest your money in it until you do. OK so it's a once in a lifetime opportunity. Mmm... funny how those once in lifetime opportunities seem to come around twice a week.
    Old Man
    17th Apr 2018
    11:31am
    BrianP, I can't agree that a "government" has failed. There are regulators who have not been doing their job. Yes, it can be argued that the regulators are government appointees but in the end, it's those regulators who have failed, not the ones who appointed them.
    TREBOR
    17th Apr 2018
    12:30pm
    Unfortunately many of the 'regulators' are self-regulator bodies, OM - it's like having a team member doubling the referee.

    As for unnannounced changes in rules etc - I've likened that to 'wait one - my team has finished the game and gone home, and you now decide the other side can continue to play?'
    Adrianus
    18th Apr 2018
    8:01am
    BrianP, it's far too easy to blame the government for every thing which has a negative impact on our lives.
    We need more focus on responsible consumerism. We have enough real victims.
    Old Geezer
    18th Apr 2018
    10:22am
    We need to take responsibility for our own mistakes not just blame others instead. People think if they fail it is the governments fault because it failed to protect them in some obscure fashion.
    Retired Knowall
    18th Apr 2018
    5:05pm
    This is a clear cut case of FRAUD and must be prosecuted as such. Executives who authorised or knew of this Fraud shoud do Jail Time.
    Imagine what would happen if You defrauded the AMP.
    Old Man
    17th Apr 2018
    11:28am
    It's good to see that the Royal Commission is getting into the malpractices of the finance industry. What we need to see is people being held accountable for these rorts. I can't accept that heavy fines will be a deterrent because they will only impact the bottom line of the company and will affect the shareholders, not the people who made the decisions to break the law.
    TREBOR
    17th Apr 2018
    12:32pm
    Calculated fraud should be punished with prison time - not 'retirement on stress grounds' with a hefty payout for life - as occurred with one CommBank 'investment advisor - poor buggar sent many to the wall and was 'forced' to 'quit' on a mere $300k pa.... sad, innit?

    Bit like sacking a politician.....
    Old Man
    17th Apr 2018
    12:52pm
    I agree Bob, should be like the bankruptcy laws where the transactions for a period leading up to the criminal act are looked at to see if anything was done by the offender to avoid obligations. But, as you point out, politicians pass laws and they won't pass a law that may affect them.
    Rae
    18th Apr 2018
    6:40am
    The Constitution actually covers a lot of the situations we have had in s44ii. All it needs is to be brought into play by the judiciary or the GG.

    When a Political Party can deliberately place a candidate in a safe seat to sell our grid or sign us up to who knows what agreements and then resign to go work for foreign governments or banks then in all seriousness we should have protections.
    floss
    17th Apr 2018
    11:39am
    How do you beat the big end of town when the government is run by them,it just will not happen.
    Old Geezer
    17th Apr 2018
    11:41am
    Easy. Learn the rules and play the game your way not their way. I do.
    Adrianus
    18th Apr 2018
    8:06am
    Well for a start you don't buy credit card insurance if you don't qualify for it. If you lose all your pension to the pokies you cant seriously blame the government can you?
    Old Geezer
    18th Apr 2018
    10:22am
    Some will try.
    mike
    17th Apr 2018
    12:09pm
    Like I said, I had no choice,and there was a penalty clause for switching, also a fee for closing the super. I did dump my other investment in AMP. Does that answer your question,
    Geeser?
    Old Geezer
    17th Apr 2018
    12:21pm
    Penalty clause for switching and fee for closing you super? Seems a bit odd to me. Can you move it to somewhere else?
    Old Geezer
    17th Apr 2018
    12:22pm
    I'd be getting some professional advice on it if it was me.
    George
    18th Apr 2018
    12:11pm
    At least, go and ring up an Industry Fund, say Australian Super (being largest) if you have no idea of which one is best, and ask them to Roll Over your money to them.
    Even if you have to pay an Exit Fee, I am sure it will be very minor in comparison to the major benefits you will reap over time compared to sitting in AMP. No Excuses! Otherwise, do blame yourself for getting ripped off!
    TREBOR
    17th Apr 2018
    12:28pm
    How is this a 'bombshell'? The profit before people motive has been SOP for years now - and just look at the joint.... services declining in real terms and costs going through the roof, and all paid for by Jo and Joe Bloggs trying to build a quiet and simple life with a home and a reliable job.
    Old Geezer
    17th Apr 2018
    12:37pm
    Agree no one runs their business as a charity. If they can't make a profit then they go broke. Profit has to come first for a business to survive.
    TREBOR
    17th Apr 2018
    3:15pm
    It depends on what is a fair profit in a fair business - nobody asked the people of NSW if they wanted more and more 'private' roads to pay tolls on.... for example...

    It also depends on where those profits go - if they are simply to fatten the top hogs, that is hardly a solid business plan.
    Adrianus
    18th Apr 2018
    8:19am
    Old Geezer, profit is not the raison d'etre of an enterprise. It follows other activities and therefor is a result of certain behaviours. When a business has profit as its main focus then it has an undue influence on its behaviour. You don't open a shoe shop to make a profit, you open the shop to sell shoes.
    Old Geezer
    18th Apr 2018
    10:20am
    I would open a shop to make a profit and would sell anything that would make me a profit. I would not open a shoe shop because I loved shoes and wanted to sell them. That would be a certain failure.
    Adrianus
    18th Apr 2018
    12:08pm
    I guess you're saying that you're an entrepreneur? That's ok.
    I disagree with your statement though. Lets take an example? An old geezer sees a few shoe shops raking in some handsome profits. So he opens one himself although he knows nothing about shoes because he is more focussed on money. He does things like have a full staff roster 7 days per week. Then looks at the trading figures only to find that people don't buy shoes in the mornings.
    Don't underestimate specialist knowledge Old Geezer, its one of the few common traits of successful people. :)
    George
    18th Apr 2018
    12:16pm
    Exactly, Trebor. Greed is the motive at the top, and the result is no surprise at all. The Govt regulators are a failure as they do not have the ability to change the rules to tackle Greed.
    The only real solution is to attack the Greed factor - put a cap on salaries to say $1 Million (as suggested by Gerry Harvey that no one deserves more), with maximum 25% Bonus based on KPIs with Customer Satisfaction run by Independent Surveys (say APRA) as the main KPI, with refit only 5% of the 25% Bonus.

    Nothing wrong with the Profit motive as shareholders would not be interested to support the company otherwise, but the responsibility to customers not to cheat them, etc, CANNOT be ignored.
    Old Geezer
    18th Apr 2018
    1:18pm
    OG would put in a vending machine so that he needed no staff and then could offer the shoes a lot cheaper than his competitors.
    Rae
    17th Apr 2018
    12:57pm
    I remember a prospectus MLC put out years ago for me that had me laughing and wondering how many fell for it. Inside the fine print were hefty fees, commissions, penalties and hidden disclaimers protecting the company at the clients expense.

    I decided to go with another platform that charges small fees for service only. Kept it outside the Superannuation gamble and couldn't be happier with the relationship.
    floss
    17th Apr 2018
    1:25pm
    Learn the rules O.G there are no rules ,please join the real world.
    Old Geezer
    17th Apr 2018
    2:50pm
    There are plenty of rules in the real world you just have to find the ones that benefit you not anyone else. I do.
    TREBOR
    17th Apr 2018
    3:52pm
    Moskva Rules - is no money - is no problem....
    maelcolium
    17th Apr 2018
    2:06pm
    It's actually worse than this article proclaims. Qualified accountants with a minimum of a University Degree, post graduate qualifications with the accounting organisations and years of experience in financial advice were effectively sidelined by the Howard Government when it was pronounced they could no longer provide financial advice unless they did a further four years of financial planning courses which were little more than money for basic courses which barely scraped the surface of financial planning. This was a scheme cobbled together by the major banks and insurers who lobbied furiously to gain a share of the burgeoning super contributions and retiring boomers.
    What the hype didn't say was that the banks and insurance companies held the planning licences and the front line planners held qualifications they attained internally with a three month course. So your average bank teller who is one step up from a checkout operator was assigned to sell to unwitting customers the bank's own products rather than providing independent financial advice. So the accounting profession was sidelined by these hacks who provided up front "cheap" advice but raked off trailing commissions and ongoing fees which deflated the investment returns from the products they sold.

    Nothing has changed despite what we are now witnessing under the RC. Any truly independent financial planning is now dead as accountants have retreated from engaging in the industry because their up front charges were seen as too high when in fact, the more expensive advice over time was the dodgy products sold by the banks and these barely literate advisors. In SA their is only one truly independent financial advisor firm in existence. Over Australia you couldn't make up the numbers for a cricket match.

    Interestingly, having been discovered, the major banks have been divesting themselves of the financial planning advice industry and instead we now have a similar setup to the mortgage brokers as independent from the banks. This is the new qualification being promoted by bank lobbying so that the gravy train can continue to roll, but the banks can appear to not be at fault with their advice, it will be the brokers or whatever they will be called who will still be operating under the bank's overarching licence, but have trifling qualifications to make them seem to be independently qualified. So it will be business as usual and was already in place before the RC. It just needed time for the banks to get their ducks in line and some delaying by government to avoid an RC until the stage was set.

    So after the RC winds up (unless the ALP wins ) the banks will place hand on heart and announce this new scheme which is largely already in place in the hope that the lie will be swallowed by the public. If the ALP wins the next election we will know the real truth and the banks are trembling in their shoes that if this occurs their game will be up. It will be a matter of timing and at the moment the timing is on the banks' side unless the RC can in some way be extended until the next election. This is why the announcement of the RC was quick and the term very short.

    We, the Australian public, have been sold a "pup" by the conservatives and their monied bank and insurance masters ...... err sorry lobbyists! It's a complete stuff up.
    Old Geezer
    17th Apr 2018
    2:53pm
    Just ask yourself one question? Would you buy an investment from a bank teller? I certainly wouldn't as they get even the basics so wrong at times.

    17th Apr 2018
    2:13pm
    If you don't know what you are paying for - then more fool you
    OnlyDaughter
    17th Apr 2018
    3:17pm
    Perhaps I am imagining it but it seems to me, in anticipation of a government banking and insurance investigation, there has been a "change of persons responsible" in the banking and insurance sector. This means that these "new" people can go to the Royal Commission and say how very sorry they are for what happened, but it wasn't them, although it was a terrible thing to happen but the person/people responsible have now been moved on and the organisation has taken another direction. Personally I doubt very much will change regardless of the recommendations of this Royal Commission, and it will be business as usual no matter which political party is in government.
    Old Geezer
    17th Apr 2018
    3:27pm
    Agree nothing will change but they will be able to say we investigated it all and that was the past and we have now moved on.
    Anonymous
    17th Apr 2018
    3:35pm
    its the banking "Truth and Reconciliation" commission

    17th Apr 2018
    7:41pm
    if you are stupid enough to believe in outsiders to look after YOUR money and even worse pay for that privilege, you are only asking for trouble. I'am sorry to say but in to-days world it is easier to find a dinosaur alive or for that matter a tasmanian tiger as it be finding a person not looking after their own interest, regardless of how many uni degrees they have, do your own assessment and if that fail you can only blame yourself
    Anonymous
    18th Apr 2018
    2:00am
    But the leftie mindset is always to blame business or those who are better off due to their hard work or blame the government for not handing out enough
    Priscilla
    20th Apr 2018
    11:31am
    All AMP senior staff and advisors should be jailed. Fees charged should be refunded to people who have been overcharged and people who have lost everything should be fully reimbursed or compensated. It is time there was some real law and order for a change.
    Justsane
    22nd Apr 2018
    9:32pm
    When I was 16, an AMP insurance salesman came round to our house and sold me a life insurance policy which was to mature at 45 years of age. So I was paying fortnightly payments to them for about 29 years. When I hit 45, guess how much I got back? Exactly the amount I had paid in for nearly three decades. No interest, no bonuses, nothing. I could have saved that money myself and done much better. Granted there would have been some sort of payout if I had died during that time, but the chances of a healthy female dying before that age is practically zilch. Charlatans all of them - no interest in anything but getting rich with your money. This sort of thing has been allowed to go on for ages, and people see their big buildings and think they are performing some sort of public service when they are just ripping money off people. It must be time to close down the private insurance industry altogether. (I have posted this also in the article: "Royal Commission takes first scalp".)


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