AMP’s continuing key BOLR caveat
AMP Limited has ensured that a key caveat has been included in its new buyer of last resort (BOLR) arrangements – that it has the right to make changes if the Government changes policy or if there are economic or product impacts.
A copy of the AMP Financial Planning Buyer of last resort policy document obtained by Money Management not only makes clear the company’s new rules with respect to BOLR valuation but specifies the company’s ability to protect itself in the ability of changed circumstances.
“AMPFP has the right to make any change to this policy should legislation, economic or product changes render any part of this policy inappropriate following consultation with the ampfpa (AMP Financial Planners Association),” it said.
“In particular, where AMPFP believes that any provision contained in this policy will, or may, cause it to breach or be subject to a penalty under any laws,” the clause states.
While the AMP Financial Planners Association has claimed that AMP did not live up to its obligations to give the association 13 months’ notice of the changes it announced last week, the new BOLR documentation again specified a 13 month notice period.
“Unless a shorter period of notice is agreed to by the ampfpa, AMPFP will give 13 months’ notice of a change to the valuation methodology for registers and to any other change having a materially adverse financial or other significant effect on a practice,” it said.
Dealing with the changes announced to planners last week, the AMP document said the following changes applied to the [BOLR] policy effective 8 August, 2019:
– Buyer of last resort multiple: the buyer of last resort multiple used to value all ongoing revenue will be 2.5 times the ongoing revenue paid to the practice in the preceding 12 months to exercise date, subject to the ongoing terms of this policy
– Grandfathered commission revenue multiple: the buyer of last resort multiple for all grandfathered commission revenue will be 1.42 times ongoing revenue paid to the practice in the preceding 12 months.
A transition period will run from 1 September 2019 to 1 December 2020 whereby the Buyer of last resort multiple for all grandfathered commission revenue will incrementally reduce by 0.0833 times ongoing revenue per month (glide path). The glide path will apply until grandfathered commission revenue ceases or AMPFP considers the grandfathered commission revenue to be temporary and is expected to cease within 12 months of the exercise date.
The buyer of last resort multiple for all grandfathered commission revenue will be 0 times from 1 January 2021 onwards.
Grandfathered commission revenue that has ceased or that is expected to cease within 12 months of the exercise date (or date the AR Agreement is surrendered) is excluded from the valuation.
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