AMP lied to regulator about financial advice fees

Cornelia Mascio
Aprile 17, 2018

AMP group executive for advice Jack Regan admitted one letter to ASIC claimed clients were at fault for being charged ongoing fees when in some cases it was the result of a conscious effort by AMP.

"What we seem to be seeing is a conscious decision is made to protect the profitability of AMP at the expense of complying with AMP's licence", counsel assisting the commission Michael Hodge said.

Despite Regan's admissions about AMP's behaviour, Hayne seemingly became frustrated with Regan's responses.

"The answer to your question is yes", Regan responded.

"Yes, I believe that's what that shows".

But Mr Hodge questioned if AMP in fact accepted it had made regulatory breaches, given its submissions to the commission only referred to possible misconduct.

"The desire to describe the cause as an administrative error was to justify to ASIC that the appropriate compensation for customers was the refund of ongoing fees rather than compensation based on no advice", the audit, read in part to the hearing, said.

AMP's head of financial advice has admitted there are reasons to be concerned about the company's internal culture after he lost count of the number of times AMP has misled the corporate regulator during Tuesday's hearing.

"It is not", Mr Regan replied.

"It's not a surprise that it's not lawful", Mr Regan told the royal commission on Monday.

"By my count, this was the 14th false or misleading statement by AMP to ASIC?. Do you agree?" Hodge said.

"And although you say its preferencing the interests of shareholders, by that I take it you mean at least in the short-term of maintaining the profitability of the company at the expense of complying with the law", Mr Hodge said, to which Mr Regan again conceded.

The Commonwealth Bank has paid $117.8 million in compensation over fees for no service, the bulk of the total amount forked out by the big four banks and AMP.

Mr Regan said the practice of charging fees was much more consistent with professional environments than paying commissions, and the latter are progressively dropping away.

As of December a year ago, AMP and the Big Four have paid or offered their customers $215.9 million of an estimated $219.5 million of interest and refunds.

Further questioning revealed that AMP, which along with the big four banks is one of the biggest providers of financial advice in the country, was continuing to generate the majority of its adviser revenue through commissions rather than fees - nearly five years after the FOFA reforms supposedly banned commissions.

Two Commonwealth Bank witnesses will give evidence after Mr Regan on Tuesday, as the second round of public hearings of the Royal Commission continue.

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