Shoddy practices have come back to haunt AMP again after the Australian regulator filed civil charges last week in relation to insurance and advice fees charged to dead clients.
In a release, the Australian Securities and Investments Commission (ASIC) says the legal action alleges five AMP entities “were involved in charging life insurance premiums and advice fees to more than 2,000 customers despite being notified of their death”.
Last year AMP paid out about A$9 million in a remediation program established to redress fees charged to close to 20,000 dead insurance and superannuation fund clients.
But the latest ASIC action comes in “respect of 2,069 deceased members affected by the retention of premiums, and 27 members affected by the retention of advice fees”.
“ASIC further alleges that the AMP companies’ conduct demonstrated a system of conduct or pattern of behaviour that was, in all the circumstances, unconscionable,” the release says.
The regulator is seeking formal declarations of legal breaches by AMP as well as “pecuniary penalties and other orders to be made by the Federal Court”.
David Cullen, AMP group general counsel, said in a statement: “AMP has taken this matter very seriously and we will now carefully consider the allegations raised by ASIC. We have been assisting ASIC with its investigation and will continue to engage constructively as part of the legal process.
“When we discovered the issues, we immediately moved to change our processes and systems and took action to ensure the beneficiaries of customers impacted were fully remediated. AMP apologises to all customers and beneficiaries who were impacted by this matter.”
The five entities cited in the ASIC suit include AMP Life “which is now part of Resolution Life Group, but was part of AMP when the conduct occurred”.
As at the end of last year, AMP had paid out almost A$200 million in compensation for charging ‘fees for no service’ or ‘non-compliant advice’, according to ASIC tallies.
However, AMP is only fourth in the payout rankings of the six large Australian financial institutions hit by similar compensation claims emerging out of the 2019 Royal Commission findings. The National Australia Bank leads the remediation payments list with about A$500 million followed by Westpac (A$240 million) and the Commonwealth Bank of Australia (A$180 million).
“… the six institutions had paid or offered a total of $1.24 billion in compensation as at 31 December 2020,” ASIC says.
Despite the relatively small sums at stake in the recent regulatory charges, the ASIC move is another blow to AMP plans to reinvent its image following years of turmoil.
The group is in the throes of a major corporate overhaul as outgoing chief, Francesco De Ferrari, engineers a spin-off of its private markets asset management business, the sale or ‘partnership’ arrangement for the in-house equities and fixed income fund business, and a shake-up at the remaining AMP Australia financial services division.
Current ANZ Australia deputy chief, Alexis George, is due to replace De Ferrari in the September quarter.
According to media reports, AMP Australia – comprising the advice, bank, superannuation and multi-asset divisions – is also about to slash 20 per cent of its workforce.
AMP said in a statement: “We are very conscious of the impact that this has on our people, these types of changes are always challenging for all of those involved and impacted – and we will provide our people with all the support they need through this change.
“We are working as quickly as possible to give our people certainty.”
Neither AMP NZ wealth nor AMP Capital NZ do not fall under the direct control of the AMP Australia and both entities this side of the Tasman have largely escaped the ASIC regulatory fallout.
Nonetheless, the AMP NZ businesses are both engaged in significant – and closely related – restructures.
Early in June AMP wealth NZ will transition about $10 billion in its KiwiSaver and superannuation master trust products to passive strategies managed by BlackRock. Most of the to-be-transferred funds are currently managed by AMP Capital NZ.
AMP, along with four other providers, also lost its KiwiSaver default status in May putting an estimated $900 million at risk when the transition to new schemes occurs on December 1.
According to the AMP NZ wealth 2020 financial statements, the company booked revenue of about $115 million (almost the same compared to 2019) over the calendar year for a net profit after tax of $11.5 million.
The now $6 billion plus AMP KiwiSaver scheme raked in $54.5 million over the period (up $4 million year-on-year) while the $3.2 billion NZ Retirement Trust held revenue steady at just over $30 million, the accounts show. All other AMP NZ wealth products saw revenue decline slightly compared to the 2019 period.