In a statement on Thursday, AMP announced that an agreement has been reached to settle the class action brought on behalf of certain advice practices authorised by AMP Financial Planning Pty Limited (AMPFP) as of 8 August 2019.
The settlement is for a total of $100 million and is subject to the finalisation and execution of a deed of settlement and approval by the Federal Court of Australia.
“This is an important step forward for our advice business and for AMP more broadly, as it allows us to put this legacy matter behind us, which has impacted relationships with our valued advisers,” said Alexis George, AMP chief executive.
“We’ve worked very hard in recent years on rebuilding the relationship with advisers and we’re looking forward to working with them in the delivery of quality financial advice, at a time when Australians need it more than ever.”
Back in July, the Federal Court of Australia found in favour of advisers in the class action filed against AMP’s subsidiary, AMPFP, in relation to the wealth giant’s controversial decision to change its Buyer of Last Resort (BOLR) scheme.
Justice Mark Moshinsky ruled in favour of the class action group, finding that the changes made by AMP with immediate effect were not authorised under the legislative, economic or product (LEP) provisions and “were ineffective”.
However, in September AMP announced that AMPFP had filed a notice of appeal in relation to the judgment in the Federal Court of Australia.
AMP said on Thursday that, in reaching a settlement, it makes no admission of liability.
AMP made a provision of $50 million in its 1H23 financial statements based on the judgment of 5 July 2023 and confirmed on Thursday that the settlement covers the class action in its entirety, including where there has been no judgment.
At the time the appeal was first announced, AMP’s group executive, advice, Matt Lawler said: “While we believe we have grounds on which to appeal, we also recognise the ongoing impact the proceedings are having on practices, with whom we’ve worked hard to rebuild strong and trusted relationships.
“We value these relationships and that’s why we are fully committed to the upcoming mediation process in November 2023, with the aim of reaching agreement on an outcome that allows us to put this behind us.”
AMP confirmed in July 2020 that a class action had been filed against its subsidiary AMP Financial Planning in the Federal Court of Australia.
The claim was brought by advisers who claimed the wealth giant failed to give them adequate notice before writing down their client book values under BOLR contracts.
Namely, the BOLR policy formed part of a contractual relationship between AMPFP and the financial planning practices in its network, which consisted of 542 practices by the time the changes were made.
The policy gave practices the opportunity to sell back their register rights to AMPFP on 12 months’ notice, which prior to the August 2019 changes, were valued at four times its ongoing revenue.
On 8 August 2019, AMPFP changed the multiple from 4 times to 2.5 times in respect of ongoing revenue.
Its grandfather revenue plan was also changed from 4 times to 1.42 times, with a further plan to continue reducing the figure per month until it reached zero by January 2021.
Back in 2020, a spokesperson for AMP told ifa the group was confident changes made to the BOLR contracts had followed the letter of the law as well as being “in the long-term interests of our clients and advisers”.
