Fund manager AMP has told over 300 of its self-employed financial advisers that they may lose their licenses to give advice.
Reports from within the company show that AMP management staff informed some of the company’s planners that they will need to find another operating license within three months, meaning that if they are unable to do so, then they cannot legally offer advice.
Managers at AMP are consulting advisors, reassessing their business models and deciding if each practice is up to the required standard to stay with the company. If an advisor falls short of the mark, then AMP will facilitate his or her exit.
A statement from AMP said: ‘It’s our standard practice to continuously work with all our advice principals to help them create sustainable, high-quality businesses to best serve their clients. We’re still recruiting advisers into AMP, and we offer a variety of different pathways – employed, aligned, direct – to best suit their careers.’
Adviser Ratings, a data provider for the financial advice industry, said that in Australia, there are just over 5,700 sole-operator advice practices and 245 operations employing more than ten planners.
There are 335 solo operators working under AMP’s license out of a total of 2,600 planners, giving AMP the largest workforce of this kind among Australia’s wealth management companies.
Sources speculated that AMP may have concerns over potential compliance issues regarding sole traders operating under their license, suggesting that it might be too risky to keep them due to the difficulty of ensuring adequate oversight of such individuals.
The Australian Securities and Investments Commission (ASIC), Australia’s securities industry regulator, has launched legal action against AMP amid accusations that the company’s financial planning arm deliberately cut clients’ life insurance cover in an effort to raise commissions. Last week, AMP shares fell to a 15-year low on the news of ASIC’s action against the company.
When ASIC launched last week’s legal action against AMP, it said: ‘By advising clients to submit new applications, the financial planners stood to receive higher commissions than they would have received under a transfer, while at the same time exposing the clients unnecessarily to underwriting and associated risks.
‘ASIC alleges that this type of advice was inappropriate and that the financial planners failed to act in the best interests of the clients and to prioritize the interests of the clients.’
Other companies offering financial planning services have also come under fire for giving unsuitable advice. Dover Financial has closed, resulting in 400 affiliated planners no longer having a license.
ASIC Chairman James Shipton said that it will continue its investigations into AMP’s activities with a view to civil or criminal action against the company.
The securities industry regulator is also currently consulting with the Commonwealth Director of Public Prosecutions over reports unearthed in April by the Hayne inquiry. The reports claim that AMP charged for advice that it did not provide, then mislead ASIC about the matter.
Some advisers have raised concerns about potential damage to their individual reputations if they remain associated with AMP due to the company’s current beleaguered position.