AMP customers face 17 years waiting for reimbursement of fees, admits boss – live | News from Australia

We move to grandfathering.

Grandfathering refers to the practice of exempting something, such as commissions, from a new law or regulation.

AMP wanted the commissions paid to financial advisors to be approved by FOFA legislation.

He said approval of FOFA legislation was highly controversial and it was doubtful whether FOFA's legislation had been passed and would become law if the minister did not provide assurances to councilors that committees would be approved.

AMP questioned Hayne's statement in his interim report that grandfathering agreements were temporary and exceptional measures.

The AMP said that final approval would be complicated and difficult to legislate, and that the end of grandfathering could negatively affect the viability of some financial advisor practices.

He also argued that there could be constitutional issues associated with the ban on commissions acquired.

In short, he really – really – backed away from attempts to get rid of commissions he had acquired.

However, Wilkins says the AMP has now changed its tone.

You have to admire the moral flexibility necessary to convince yourself that although you are now a financial advisor, not a distributor of financial products, you find it incredibly difficult to change your mindset – so it's not really your fault if you're charging fees for services you are not providing.

Hodge: "The mental change that many financial advisors seem to find difficult was to understand that they were no longer a distribution network for product manufacturers; were they now professionals providing advice and acting in the best interest of clients?

Wilkins: "This was certainly a significant shift for several people in the advisory network, particularly in the introduction of FOFA reforms.

Hodge: "Well, it must have been a switch to prepaid AMP because the AMP had switched to service fees in 2010?

Wilkins: Yes.

Hodge: What do you think it says about the cultural norms of financial advisors that this does not seem to have, not only was not universally the case, but so significantly was not the case?

Wilkins: "I think the financial advisory industry is improving. I think where it was coming from was a transaction-by-transaction arrangement where commissions, including trail commissions, continued, and there was no expectation that the services would be delivered to the trail commissions..

Hodge: "If we were to cut the heart of it, until the shift to service fees, would the financial advisors effectively be a distribution network or channel for wealth products and insurance products?"

Wilkins: Yes.

Hodge: "And did they receive commissions from manufacturers of wealth products or insurance products to distribute products to consumers?"

Wilkins: Yes.

Hodge: "And were they paid trail commissions, usually as part of that?"

Wilkins: Yes.

Hodge: "And they did not have to provide a consumer service in return for the trail commission?"

Wilkins: "The commission was being paid by the manufacturer of the product. That's right. It was a payment by the manufacturer of the product. "

Hodge: "Did not that require them to provide any consumer service?"

Wilkins: "No"

So the people who work in the financial consulting industry are so ignorant that they do not understand the basic rules.

I think we already knew that.

Hodge: "You wonder, however, why it is necessary to tell your consultants that if they are charging a fee for a service, they need to provide the service?

Wilkins: "It would be a normal expectation for people to understand this."

Hodge: "Outside the financial advisors, it's hard to think of any profession or group of people that thinks that if they charge money for a service, it's okay to provide the service?"

Wilkins: "You'd think where a fee was agreed, the service would be delivered."

Hodge: "That's certainly what most professions are accustomed to?"

Wilkins: Yes.

AMP consultants did not have the education they needed to realize that they could not charge fees for services they did not provide.

Hodge pointed out that the AMP tried to "make the leap" in the Future of Financial Advice laws – which were introduced in 2012 – by getting rid of commissions and switching to service fees by mid-2010.

Hodge says he finds it strange that, considering that AMP was clearly at the top of the laws, it took another five years for AMP consultants to realize that they needed to provide services in exchange for fees.

Wilkins: "I think a lot of them understood that, but also a number, and as educational standards improved, as the policies and procedures that AMP implemented narrowed, we saw an improvement in that."

(What level of education do you need before you know you can not charge fees for services you do not offer?)

In any case, AMPs and ASICs still need to agree on some final policy issues about the remediation program, so AMP is still remediating customers according to its original approach, which will lead to nine years to remedy all, instead of three years.

Hodge: "Do you consider this a satisfactory situation?

Wilkins: "I would like to finalize the agreement with ASIC."

Hodge: "What was the reason the AMP initially tried to exclude them?"

Wilkins: "We believe that with less than $ 500 in total fee, it's more likely to be general advice rather than personal counseling and can be excluded from the process."

While realizing how poorly it has treated customers, with its slow remediation approach, AMP still tries this year to exclude some customers from the program.

In September, AMP sought to exclude clients who paid less than $ 500 a year for financial consulting from the review and remediation program.

The total amount of the fees relating to these contracts for the period from 1 July 2008 to 31 $ 158 mi, affecting about 271,000 customerss.

However, Asic said these customers should not be excluded.

AMP has now agreed to include these customers.

I think this means that customers who have had to wait 17 years to be remediated now will only have to wait 13 years?

Thus, a "repair and repair team" was established in May 2018, and AMP made a commitment to ASIC so that customers could be remediated within three years.

AMP expects to be able to complete the repair within three years from July 1, 2018.

It has 150 employees working on remediation, and the revised total cost estimate for the program is now US $ 778 million.

This includes the cost of running the program within three years.

Therefore, in June of this year, the board was informed that the AMP required a significant redefinition of its review and remediation program.

(I wonder how much this advice costs?)

Hodge is asking Wilkins about the excessively slow time it is taking for AMP to remedy customers.

Part of the problem, from the AMP perspective, is that it's incredibly difficult to track down all the customers who have been charged for any service.

AMP systems are very poor.

This leads to this incredible fact.

As the AMP took so long to take action, AMP realized that there might be some customers who could have charged fees but had no services rendered in early 2008. which could take up to 17 years after these rates were charged for correction.