Former AMP planner details bankruptcy fears in BOLR turmoil
As the AMP court case takes place this month, a former AMP planner has shared how he was nearly driven to bankruptcy after the firm devalued his business.
The case against AMP brought by Corrs Chambers Westgarth on behalf of AMP financial planner regarding AMP changes to its Buyer of Last Resort (BOLR) scheme was being heard in the Federal Court in Melbourne this month.
Speaking to Money Management, former AMP planner, David Haseldine, who was not a participant in the court case, said the level of corporate brutality being demonstrated during the case so far was “astounding”.
He bought a book of clients from AMP Financial Planning (AMPFP) in 2010 worth $250,000 and a second book in 2015 and had expected to sell it for $600k at a later date. After repaying AMP $200,000 in debt, this would have left him with a $400k business. However, when AMP changed the BOLR rules, he was given five choices.
These were to merge with a larger practice; pay out the debt and AMP would release institutional ownership of the clients; accept standard BOLR terms at 2.5x; an accelerated BOLR exit or do nothing and have his AR terminated.
The “least unappealing” of these was the accelerated BOLR exit, he said, as a way to pay off his debt.
However, in an exit audit in February 2021, AMP selected his 20 largest clients, which represented 80% of his revenue, and failed each file. This meant the Australian Securities and Investments Commission (ASIC) required fees for those clients to be turned off and he had no right of reply or appeal.
He said: “This had two significant consequences, my net business value (after taking off the debt) went from being slightly positive, to very negative and, if I had continued to trade I would have run the risk of doing so whilst technically insolvent. In my mind I had no option but to resign my AR with AMPFP immediately.
“A lot of my clients were with me before AMP, are still with me now and they are happy. It was a blatant ploy by AMP to get rid of me, it didn’t use an independent reviewer, AMP was judge, jury and executioner.
“I have always been fee for service and this made it easier for AMP to say I couldn’t justify the fees I charged. But that’s completely subjective, my clients have always known how much I charged and what that entailed.”
The next turn of events was for AMP to ask Haseldine to use his own family home as formal security against the debt. If he did this, AMP would give him a 20% discount on his loan.
“This meant AMP could find me in default and sell my property.
“It’s been challenging, there’s been some dark days, no one wants to tell their partner [AMP] want their house.”
Facing bankruptcy in 2020, Haseldine opted to seek an external loan which would allow him to pay off AMP without needing to sign a non-compete clause or non-disclosure agreement.
“I had a $600k business and it went to zero and left me with debt.”
Unlike many other AMP advisers, he was able to get another AFSL in July 2021 and his most of his fee-paying clients back from AMP so he was still practicing as a financial adviser at The Updated Investor.
“I understand that change occurs but you can’t fundamentally change a relationship at a moment’s notice and pass the costs on. That’s unreasonable behaviour.
“I wanted to sell my book at 65 and retire and be financially sorted, that’s gone now. AMP has stolen from my retirement.”
A spokesperson for AMP said: “For advisers who elected to use the now historic BOLR facility, AMP Financial Planning had a clear policy in place to determine a value for their business that reflected a range of metrics including quality of advice delivered and ongoing practice revenue. This is consistent with maintaining high professional standards for the benefit of clients.
“In instances where the audit revealed shortcomings or issues within the business, a discount could be applied to the valuation reflecting the quality of the business being acquired, which is typical of most M&A transactions in any industry. This was in line with the terms of the BOLR policy.
“After receiving a request to undertake the BOLR process in November 2019, in line with the in-force policy, AMP Financial Planning completed a review of Mr Haseldine’s practice to determine its value. Unfortunately, his practice did not meet a number of requirements outlined in the policy, which reduced the value of his business and resulted in the adviser not progressing his application.
“To support Mr Haseldine, AMP Bank has been in confidential discussions about assistance with his loan.
“Due to an agreement AMP Financial Planning had offered, Mr Haseldine’s audit fail did not result in a discount to his BOLR valuation. However, the combination of client remediation costs and bank debt contributed to the adviser being in a position of negative equity. To support the adviser, AMP Bank held discussions on other options for the adviser to continue servicing the debt.
“AMP Financial Planning is participating in the trial currently underway in the Federal Court in Victoria regarding BOLR so we can reach a conclusion for all parties involved, including Mr Haseldine.”
The AMP court case was scheduled to last for four weeks.
AUTHOR
Laura Dew
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Brutal is an understatement. They are corporate thieves!!!
Same situation we have been in for years and many others all driven by AMPFP. They have such unconscionable conduct. But the legal system does not acknowledge it.
AMP. What a cancer on the industry. Hurry up and go broke.
hard to the follow the maths of it. Of course we are only getting half the picture. I agree as a former auditor, an audit can have subjective element. or cannot, but mostly can. For such an important decision, they should have an external audit, or at least a second audit internally to address each item in dispute (which you would think a decent org would but dont know about AMP).
As I said, i am simple so dont get the maths, but at 2.5x, and he couldnt pay off <200k debt, his business must have finally been valued at $50k (from his of 600k). Lastly, he went off into the sunset with his great clients, how is he doing now? The stress of course, is he upset its not worth 4.5x, and only probably 1.5x on the open market?
PS i'm an ex-auditor (Price waterhouse) and have run audit departments in listed and government executive roles. I tried to engage both the chairwoman and the audit / corporate governance sub-committee on how audits are supposed to be run. Their answer was basically to refuse to take my calls - although to give her her due, Hazleton did delegate it to internal execs to address my concerns. They swept it under the carpet. And ASIC said they had so many cases open against AMP that they just couldn't open another one and they preferred to let the court case complete first before digging in.
For a while there, I think AMP's audit department was their highest earning profit centre! Now that would be an interesting stat to get hold of Laura Dew - what were the KPIs of former auditors employed within AMP......???
Congratulations David on finally being able to bring the appalling conduct of AMP into the public arena. As more such stories are told, I really hope that AMP will stop spreading mis-information about the way it has treated its advisers over the last couple of years.
I am not and thankfully never have been an AMP adviser. But I know a few. And I know there's more horrific stories to come.
This is the brutality of a greedy and unconscionable corporation. They were happy to sell the business to us at 4x, and when the markets were doing well, and everyone else was paying 2.5x then, but as soon as "they" saw the writing on the wall, and the industry was changing, and the financial planning market declining, they claim it was 'inappropriate' to buy back at 4x. All this happening in a closed market yet they were happy to sell to us at above market.
Appalling behaviour by AMP, just appalling!! Hopefully the class action makes an example of AMP and sends a message to all corporations that they can't get away with this sort of behaviour.
In this article and everywhere where AMP gets to spin their BS they make it sound like it is the adviser's fault for failing the audits.
AMP has been auditing these files and these advisers every year and never had a problem.
Furthermore, these files are audited at 2 different audits: the Look back and the Exit audit.
The "Look back" is conducted by ASIC and surprise surprise, these files pass the audit.
The "Exit" audit is conducted by AMP and affects the valuation. Surprise surprise these audits fail.
Then, AMP takes these clients they absolutely "steal" from exiting planners and on sell them!!!
The only reason AMP are in court is that they believe they can get out of their commitments cheaper this way.
Appalling behaviour by AMP. I hope the class action against them wins, and sends a message to all corporations that this sort of behaviour ruins lives and is just unacceptable!
AMP in Court said they couldn’t afford a BOLR run, why is that? Did they not accrue for their legal contractual obligations? After all they sold the registers to advisers for 4 x and would onsell any BOLR repurchases after. Even if that was at a lower rate due to grandfathering, I believe giving the required 13 months notice would have been cheaper than the extraordinary amount of money they have spent on legal fees. This has also further damaged AMP’s already poor reputation in the industry and with the public. They are showing their colours in Court that’s for sure.
I also experienced AMP's exit audit which were totally fabricated with AMP's objective to fail enough files to dramatically reduce the money they paid to buy the book back. Perfect arbitrage for AMP.
AMP had to get their balance sheet back in the black so effectively stole the money from the advisers to achieve this.
Interesting comment by AMP spokesperson. I personally know Dave and he's an amazing financial planner, as his clients will attest. They continue to support him and seem happy to have moved away from AMP. On the other hand, I also have personal statistics on AMP exit 'audits', which ASIC said they were too busy to follow up. They show a damning indictment of AMP's use of the so called audit to further reduce the amount they had to pay out to planners.
Anyone listening to the court case would be horrified by AMP's strategic decimation of its planner force. Lets see whether what they did was legal or not - it certainly wasn't moral OR within the legal requirements of a Licensee's obligations under Corps Law! I bet ASIC and ACCC are adding to their case files from all the insights being revealed in Melbourne this October.....
"AMP has stolen my retirement dream".... well AMP and AMP advisers themselves have stolen the dreams of many Advisers. Including myself by entering into business agreements built on conflicted and subsidized remuneration that resulted in massive Government intervention. Intervention that has caused many to leave the industry and suicide. Many have seen their business valuations plummet by hundreds of thousands because of the cost of providing advice due to that bad regulation.
Some advisers at AMP complain about weaponized audits where as AMP complains about their advisers all being so bad that they fail their audits. Is AMP so bad that none of their advisers are compliant or are they actually weaponizing audits to justify bankrupting advisers?
Good question Barry. I've seen the stats on audits and they are dire. So AMP is either guilty of failing its legal requirements under Corps Law to properly train, monitor and supervise for all the years that these planners have been AMP planners.... (and let me say, their audits were tough, regular and extensive - other licensees have said how good our files were, even though we have been traumatised by the process!). OR AMP was deliberately doing it to make money at the expense of their planners, which of course was the end result if they 'failed' audits.
Maybe this might help you work out which is which: It came out in court in the last 2 weeks that AMP categorised their planners into 4 categories, one of which was 'planners exited on acrimonius terms' with a strategy to be applied to them of sueing them into bankruptcy. And the CEO at the time put in writing his musings about how AMP might acquire all these client registers for 'zero'......
Spot on! AMP have backed themselves into a corner.
This is up there with the abrupt shut down of Dover as the most disgraceful thing in my 20 plus years in financial planning.
I'm aware some time back a former AMP adviser was starting to ark up at the treatment he was receiving from AMP.
At an audit, they failed a number of files based upon the advice he provided,. but here's the joke of this.
The adviser paid AMP para-planning to prepare his SOA's, so they failed their own internal para-planning service.
What does that tell you about AMP ?