AMP has been called to the mediation table by the small business ombudsman, following concerns that many financial planners could be facing financial ruin on the back of AMP’s announced exit from the advice space.
The Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, has urged AMP to formally commit to mediation, as it moves to exit up to 250 financial planning businesses, many of which are independent small advisers.
In an attempt to distance itself from the post-Hayne royal commission saga, wealth manager AMP unveiled its plan last year to reduce its adviser network and devalue aligned practices under its buyer of last resort (BOLR) arrangements by 37.5 per cent.
AMP advisers received a letter at the time informing them of the wealth manager’s decision and outlining several options they had to leave the group. This included an opportunity to sell their business back to AMP, but at half the price and with restrains on trade that mean once a planner sells their business back, they cannot work in the space for three years.
‘Come to the table’
Ms Carnell revealed on Friday that more than 80 AMP financial planners have approached her office in the past few months, reporting that many face financial ruin as a result of AMP’s exit terms. The situation is especially hard for those that borrowed from AMP to buy their client books, the ombudsman said.
“Many of those planners who borrowed from AMP to buy into the business at a set price, now face losing their homes and their livelihoods, as the financial institution seeks to impose a three-year restriction on working as a financial planner,” the ombudsman said.
She revealed that her office has met with AMP and although they signalled they were open to mediation, they have yet to confirm their participation.
Ms Carnell said: “It’s critical these small business owners have clear information about their financial position before making any big decisions about their future. Mediation would be one way of providing that much-needed clarity.
“We’ve called on AMP to waive debts for those financial planners facing AMP-imposed reduced buyback values.
“AMP has also been asked to extend its termination deadline so that a resolution may be reached.”
Small businesses in the financial planning industry have faced a great deal of turmoil in the aftermath of the banking royal commission, with hundreds of planners bearing the brunt of brutal restructures and fire sales by banks and wealth funds.
“We remain concerned about a number of behaviours that may include the conduct of lookback audits, financial planning licensors shifting responsibility for client compensation payments to licencees, short notice periods provided to licencees exiting the business and restraint of trade provisions,” Ms Carnell added.
Maja Garaca Djurdjevic is the editor of My Business.
Maja has an extensive career as a journalist across finance, business and market intelligence. Prior to joining Momentum Media, Maja spent several years unravelling social, political and economic intricacies in Eastern Europe.