'That's not really how it works': AMP's royal commission shambles
AMP has stumbled its way through a shambolic first examination at the banking royal commission after the wealth manager admitted senior staff ignored legal advice that the charging of customers for services they did not receive was unlawful.
The royal commission also heard on Monday that AMP’s financial planning arm was riddled with misconduct and that the group’s financial planning arm had identified more than 500 planners who had committed fraud, were dishonest or incompetent.
AMP also admitted it made 10 false statements to the Australian Securities and Investments Commission and that its scheme to provide a retirement plan for external advisers was designed to incentivise the sale of AMP’s products over those of other banks.
The wealth manager is the first case study for the banking royal commission's second round of hearings into financial advice. Representatives from the Commonwealth Bank, National Australia Bank, Westpac and ANZ Bank will all also be called to give evidence over the next two weeks.
AMP’s day lurched from bad to worse when its head of advice and New Zealand, Jack Regan, was forced to admit that he did not know what he was apologising for when he made an apology for regulatory breaches in his witness statement.
During an excruciating exchange with counsel assisting Michael Hodge, QC, Mr Regan said at various points that the apology related to AMP making misleading statements to ASIC or the breaching the wealth manager’s financial services licence or the Corporations Act.
However, AMP had made no such admissions in its submission to the royal commission.
When asked for the last time by Mr Hodge what breaches the apology referred to, Mr Regan said: “I’ll have to take that on notice”.
Mr Hodge replied: “I’m afraid that’s not really how it works. Is the answer just that you don’t know?”
Mr Regan responded after a long pause: “Yes, I am uncertain."
Mr Regan moved into the role of head of advice at AMP in early 2017 and immediately instigated a review of the company’s administration of its buyer of last resort scheme after he noticed that customers were being charged fees for services they did not receive.
Under the arrangement, known by its acronym BOLR, AMP is the buyer of last resort if an adviser wants to retire. The clients are then placed into a pool but do not receive advice.
Between 2012 and 2017 AMP was charging these customers fees for services they did not receive.
Mr Regan admitted that up until June 2017, BOLR incentivised external planners within its network to sell customers products from AMP’s in-house platforms over those of other platforms.
The royal commission heard that AMP had legal advice since before 2012 that it was unlawful to charge fees to its BOLR clients because they were not providing any service.
Mr Regan told the royal commission a review of AMP’s processes found that staff had approved the ongoing charging of fees against legal advice.
The royal commission also heard that 81 financial advisers within AMP since 2009 had potential serious compliance concerns, while another 440 had lower level compliance issues over the same period.
In 2016 alone, 18 financial planners within AMP’s networks faced compulsory examinations from the corporate watchdog and AMP received 85 notices to produce documents during that same year.
-- with Clancy Yeates