Planners want pre-RC BOLR valuations


The AMP Financial Planning Association (AMPFPA) is being pressured by members to obtain a definitive answer from AMP Limited about how it will treat buyer of last resort (BOLR) contracts in the knowledge that grandfathering will end in 2021.
The degree of concern amongst AMP planners on the future of BOLR arrangements and the consequence impact on practice valuations has been laid bare by the discussions on the AMPFPA blog in the wake of the final report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
Senior planners with substantial AMP-aligned businesses have expressed concern at the future valuation of their businesses and have canvassed AMP Limited being pressed to buy grandfathered accounts under BOLR arrangements as the pre-Royal Commission valuations.
The concern being expressed by AMP planners about the value of their BOLR arrangements is also reflected in a survey conduct by Money Management last week which revealed slightly under half of respondents believed the 2021 end-date for grandfathering would erode their BOR positions.
This was despite the fact, that nearly half of all respondents to the survey revealing that grandfathered commissions only represented 10 per cent or less of their turnover, with a further 13.5 per cent suggesting it represented up to 20 per cent of their business.
However just over 16 per cent or more of respondents said it represented 50 per cent or more of their turnover.
Analysis provided by specialist research house Dexx&r has also pointed to the BOLR impact from the removal of grandfathering, noting the obligations incumbent on firms which had entered into such agreements with planners.
At the same time, financial planning business brokerage, Radar Results has claimed that valuations have declined by 33 per cent where grandfathered commissions are concerned.
It said that recent sale transactions of grandfathered trail commission clients had traded between 1.5 times and two times the annual trail amount, but in the wake of the Royal Commission had fallen to between 1.0 times and 1.5 times trails, giving buyers approximately 22 months of income.
Recommended for you
AFCA has confirmed United Global Capital’s membership of the body will not be extended to accept further complaints, avoiding a repeat of the Dixon Advisory scenario.
Three of Australia’s largest financial advice groups have shared their thoughts with Money Management on whether they would include crypto on their approved product lists.
Shadow treasurer Angus Taylor has vowed to introduce a bill to legislate a raft of financial services reforms if the Coalition is elected.
Money Management examines the share price of financial advice licensees over one year to 31 March, with M&A actions in the final quarter having a positive effect for two licensees.