Opinion: The AMP BOLR saga and the last days of Rome
Next week’s class action against AMP may well be remembered as the final fight by aligned planners against structural shifts over which they are ultimately powerless.
Back in 2019 when I was editing Money Management’s sister publication ifa, I became a confidante to a number of AMP financial planners. While ifa had traditionally been a publication for independent advisers (given its namesake) the war between aligned and non-aligned advisers was basically over. AMP planners needed their story told and so I told it – warts and all.
The heart of the matter was AMP’s decision to change BOLR agreement multiples from four times to 2.5 times, thereby reducing the amount planner could sell their business back to the group for by 37.5%.
Most planners had taken out loans with AMP bank to finance the original purchase of their business. They felt a 40% devaluation was a kick in the teeth, to say the least. I took many calls from anxious planners who were audibly on the edge. As a journalist, I felt it was my responsibility to share their pain with the broader community.
The matter is now before the Federal Court. AMP has been instructed to provide key documents related to BOLR, including any text messages between former CEO, Francesco De Ferrari, and former advice boss, Alex Wade, by 4pm on 16 October.
Whichever way the final decision goes, it is a losing game.
AMP’s BOLR agreement is fast becoming another relic of an industry that has changed so significantly it barely resembles its former self. The Golden Age of Advice, at least for AMP planners and those who retired on recurring commissions, is over. The new era has not quite arrived, but it is on its way, and the economics of it are starkly different.
The future of financial advice is a far more open market, both for advisers, their APLs and for clients. Gone are the days of flogging branded products for fat commissions, selling your clients for four times their worth and then retiring to the golf course. We no longer live in that world.
My father was an airline pilot for Cathay Pacific. In the late eighties and early nineties, being a Cathay pilot was the best gig in town – great salary, private school fees paid for, profit share, full medical. Hell, even a housing allowance. But all good things come to an end. Today, being an airline pilot is far less glamorous, or lucrative, as it was 30 years ago. Dad continued to fly until he died a few years ago at the age of 66. He didn't cry foul when the conditions changed. He just wanted to fly.
Any occupation can be highly rewarding. It all comes down to the individual and their motivations. Many financial advisers are building a far more organic profession around the financial and non-financial lives of their clients. Client satisfaction is fast replacing business valuation as a priority for the practices in 2022, and as a result their business valuation is doing just fine.
AMP and other major licensees are hardly the enemy here. There isn’t really an enemy. It’s just the changing of the seasons. Licensees have a major uphill battle to try and turn a profit. I don’t envy them. Trying to make money from an AFSL is like selling face masks after the pandemic.
Any advisers still clinging to the good old days and fighting a crumbling system will continue leaving the industry in droves. It will take time, but a new generation will replace them. And memories of BOLR agreements and closed APLs will be met with disbelief by 30-year-old financial advisers who were attracted to a completely different profession.
AUTHOR
James Mitchell
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Wow, James you clearly have absolutely no idea about issues at hand here. This is not about a loss of revenue through reduced life commissions or removal of investment commissions or any other benefits enjoyed in the "good old days". This is about a firm who decided it will change the terms of the contract previously agreed upon. Firm which mind you encouraged those same planners to borrow via its own bank and signed a contract confirming clear terms re BOLR. The facts are that AMP planners are not complaining about reduced revenue, life insurance commissions nor about removal of other commissions. Market took care of this with "an invisible hand".
Sorry, but your pilot comparison is so out of touch. More fitting comparison would be if a pilot was given an employment terms whereby he can send his kids to private school (at reduced or no cost) and enjoy free accommodation only to be told few years later than he owes funds to both the school and the landlord.
James’ article seems to go from original sympathy for the greed, to you probably had it too good, get over it. There were plenty of amp advisers that rode off with the clients they wanted or took the payment and extinguished the loan. James does not say if the 2.5 times doesn’t complete loan plus profit. It’s been said before by others, ordinary advisers wanting to sell back a ordinary business for ridiculously over valued price. Should have been pleased with 2.5 times
A number of years ago we paid our out retiring business partner with the promised arrangement we made decades ago and took over what is still a flourishing practice. In my 60s and over 3 decades in the industry/profession I've had Licensee BOLR come and go in various forms, and to a certain degree our arrangement within the partnership could be seen as similar.
Being self licensed for a number of years and having ticked all the required boxes to keep going, we would probably be disappointed at what we may get dollar wise if we sold. It's a different world now than it was. We'll keep going, enjoy our relationships with our clients and bring in some young planners to work up to the standard we expect. Not sure if or when we'll ever retire. So that's the theory.
Now to AMP. Regardless of anyone's opinion of BOLR, they promised the purchasers of businesses a multiple and had no problem funding this in house with smiles all around. They may have the contract wording on their side, but they are morally and ethically bankrupt in changing the deal for the advisers who made the fatal mistake of trusting them. I accept the fact that our business could be worth anywhere from zero to millions, that's how the open market works. But if you have an agreement then, like we did with our business partner, you stick with your promise.
Here is a fair solution. Deduct every compensation or refund that applied to each book from the final pay out. Keep a portion in reserve for future claims and pay out the left over after 6 years. At least then AMP planner’s would be accountable for sub standard advice. They may ho for each as every advisers loves the phrase “I’ve never had a complaint” even when a lie. Honestly, only dealings with corporate AMP have been shit, and the one Planner rep I met at an open day at Uni was a total tool telling planning students there were no jobs (back in mid 90s). What a weak POS that bloke was. Scared of young competitors it seems.
Yogi, you don’t seem to grasp the BOLR issue and seem to be judging all AMP Planners to be the same as the one tool you met. I know many AMP Planners who left two million dollar businesses with nothing and had never had audit problems prior to the very unfair BOLR exit audits, created to extract more funds from already robbed planners. This resulted in total destruction of people so you might like to work on your empathy skills a little.
Oh James, where did you miss the point so badly? This case is about the bullying tactics employed by BIG business to force small business into submission! Corporations Law in Australia shouldn't allow this to happen! AMP didn't just breach its contractual obligations by changing the multiple from 4 to 2.5 without a proper basis on which to do so. It also continued to DEMAND the FULL payment of any loans that it had made to purchase those books in the first place, based on - yes, you've guessed it - AMP's OWN valuation at 4x.
And then (causing untold mental breakdowns in the process), it proceeded to apply subjective and one-sided exit audit processes to each adviser that resulted in AMP paying far less than 2.5x overall for the final trail amounts! Exiting planners (most of them forced out with no alternatives) were left having to remortgage their homes just to get away from AMP, or forced to stay with a Licencee they didn't trust because they couldn't afford to leave.
To add insult to injury AMP planners were prevented from going public with what was happening to them due to the 'gag' order built into their contracts - i.e. along the lines of "speak out and you are entitled to $ZERO and we will sue you for defamation..."
This was a brutal saga in AMPs history that current execs are blaming on previous management, as if somehow that leaves the company innocent.
Lets see what the court makes of this sad and sorry business. AMP should be hanging its head in shame, if it even survives the public scorn when the truth finally comes out.
My heart goes out to all those AMP, Hillross and Charter planners who were affected by this nasty business, may you finally see justice over the next four weeks!
Trust me when I say this, every single person that takes that immense risk of opening a business is doing it for profit.
"Client satisfaction is fast replacing business valuation as a priority for the practices in 2022, and as a result their business valuation is doing just fine. "
Yeah like satisfaction is important but if you are risking your income, personal assets, etc etc I guarantee you will not be able to find a business owner that doesn't value their business valuation...
You seem to think being licensed under AMP was some kind of golden age picnic. Let me tell you, it was not. They made mistakes as every turn, sold PSO books full of non existent policies, dead people, etc. a fraud perpetrated for years. I never made fat commissions flogging their products because their products didn’t come out best for clients. I worked hard and made a modest income as a planner. The torture AMP perpetrated against hundreds of advisers resulted in bankruptcy, mental health and family breakdowns, and suicides. Get your facts straight if you plan to be an investigative journalist. There are plenty of planners who walked away with nothing who want to tell their stories if you care to hear.
James, this isnt about 'all good things come to an end', making it sound like we, the planners are the ones that were on a good wicket. It was AMP that was on a good wicket, by selling us businesses above the market rate at 4x, with the promise that they will buy back at 4x. There is a written contract that AMP decided to change with out consultation of the TAA, using economic change, pre covid, as the excuse. It was ok to take our money at 4x then internally devalue our businesses whilst they still expected loans to be paid off. I strongly believe you missed the point or you do not understand the situation. In fact, i take offence to your article as it is very one sided.
James, you could not be more wrong. A contract was in place, and AMP moved the goal posts. Imagine if your agreed salary with Money Management was reduced by the same percentage.... From a non-AMP person who has not been impacted by this, but feels for those who have been.
Oh James, where did you miss the point so badly? This case is about the bullying tactics employed by BIG business to force small business into submission! Corporations Law in Australia shouldn't allow this to happen! AMP didn't just breach its contractual obligations by changing the multiple from 4 to 2.5 without a proper basis on which to do so. It also continued to DEMAND the FULL payment of any loans that it had made to purchase those books in the first place, based on - yes, you've guessed it - AMP's OWN valuation at 4x.
And then (causing untold mental breakdowns in the process), it proceeded to apply subjective and one-sided exit audit processes to each adviser that resulted in AMP paying far less than 2.5x overall for the final trail amounts! Exiting planners (most of them forced out with no alternatives) were left having to remortgage their homes just to get away from AMP, or forced to stay with a Licencee they didn't trust because they couldn't afford to leave.
To add insult to injury AMP planners were prevented from going public with what was happening to them due to the 'gag' order built into their contracts - i.e. along the lines of "speak out and you are entitled to $ZERO and we will sue you for defamation..."
This was a brutal saga in AMPs history that current execs are blaming on previous management, as if somehow that leaves the company innocent.
Lets see what the court makes of this sad and sorry business. AMP should be hanging its head in shame, if it even survives the public scorn when the truth finally comes out.
My heart goes out to all those AMP, Hillross and Charter planners who were affected by this nasty business, may you finally see justice over the next four weeks!