The Federal Court of Australia has found in favour of advisers in the class action filed against AMP’s subsidiary, AMP Financial Planning, in 2020, 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 on Wednesday morning (5 July), finding that the changes made by AMP with immediate effect were not authorised under the legislative, economic or product (LEP) provisions and “were ineffective”.
In a filing to the ASX, AMP said: “AMP acknowledges today’s decision in the Federal Court of Australia in relation to proceedings brought on behalf of advice practices authorised by AMP Financial Planning Pty Limited (AMPFP) as of 8 August 2019. The proceedings challenged the validity of some of the changes made by AMPFP to its buyer of last resort (BOLR) policy in August 2019.”
“The court has today ruled in favour of the claims of the lead applicant and sample group member.”
Lead applicant Equity Financial Planners is entitled to damages in the sum of $813,560, while sample group member Wealthstone is entitled to damages in the sum of $115,533.51. There will be a further process to determine the impact on other group members, the court acknowledged.
In its response, AMP added that noting the complexity of the matter, it is reviewing the judgment in detail to determine the full effect of the judgment and its next steps.
“AMP will provide an update in due course,” AMP said.
AMP announced 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 four times to 2.5 times in respect of ongoing revenue.
Its grandfather revenue plan was also changed from four 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 SMSF Adviser’s sister brand, 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”.
“The financial advice industry has transformed dramatically in the past few years, including the removal of grandfathered commissions, new mandatory education standards and higher advice standards,” the spokesperson said.
“AMP has made difficult but necessary decisions to ensure we adapt to the new environment and continue to have a strong, viable advice business for clients,” the spokesperson added. “We recognise the changes are challenging for many in our adviser network, and we’re providing support to our advisers to help them manage the transition, including those who support the class action.”
