“They have to make that judgement call,” Mr Macdonald said. “Do you take the offer today or do you wait until the case settles which might be another one to two years?”
The class action filed by the advisers in July was triggered by changes made by AMP to a longstanding policy – the Buyer of Last Resort (BOLR) – that determines the value of their businesses.
The previous BOLR agreement was more generous than the industry standard, with retiring advisers being paid four times the annual revenue of their client books once they left the industry. The policy was part of AMP’s strategy to become the country’s largest financial planning network but was criticised in the banking royal commission for incentivising the sale of in-house financial products.
AMP chief executive Francesco De Ferrari is leading a new strategy to make its adviser network more “professional, compliant and productive” and has predicted it will result in around 30 per cent of the network dropping off.
In August last year, AMP reduced the BOLR rate to 2.5 times annual revenue in an effort to cut costs. The change has drastically pushed down the value of adviser businesses, leaving many in debt. The Age and Sydney Morning Herald has been contacted by scores of current and former advisers who claim they have developed mental health issues as a result.
“The impact that this has had on my family, staff and myself has been absolutely devastating,” said one adviser, who could not speak publicly due to signing a confidentiality agreement. “I have gone through every emotion possible and I just feel completely drained, empty, disillusioned, betrayed, angry, depressed and frightened about my future.”
The advisers claim AMP has been unwilling to negotiate better exit deals or reverse the policy for long-standing employees. One adviser, who also could not be identified for legal reasons, said his business was previously worth $2.4 million with debt of $1 million and the BOLR changes meant he now owes AMP $300,000.
“My retirement plan is now gone. I have to sell two properties and will be working for the next 10 years plus,” he said.
The adviser lawsuit is among the four class actions AMP is preparing to battle. Mr De Ferrari has publicly criticised Australia’s class action industry, claiming the litigation is increasing the cost of doing business which may lead to job losses.
An AMP spokesman said he could not comment on individual contracts with advisers for legal reasons, but pointed to an old statement regarding the “difficult but necessary” decision to change the BOLR terms.
“Throughout the process AMP has consulted with affected advisers, the industry associations and the Small Business Ombudsman, including participating in several mediation sessions with advisers. We are providing support to advisers to help them manage the BOLR changes and make an informed decision for their future,” the spokesman said.
Labor Senator Deborah O’Neill has been agitating for AMP to be brought in front of the upper house finance committee so the legality of the BOLR changes can be investigated. She secured cross-party support from Liberal whip Bert van Manen, who described the policy change as “unconscionable”.
However, the push was knocked back last week, with the majority of committee members voting against the proposal. Senator O’Neill said she was deeply disappointed by the result.
“They chose to protect the powerful AMP and leave the lingering traumatised advisors to the mercies of a long court battle,” she said. “Profit at any price is not commerce. It is exploitation.”
Senator O’Neill said the recent departure of chair David Murray and director John Fraser over showed shareholders would not tolerate poor corporate culture.
“A Parliamentary inquiry into AMP’s BOLR changes will serve as a reminder to all financial services providers will be put on notice that they cannot quietly backslide into old, bad habits.”
The news comes as AMP raised the “white flag” this week and put up parts of the company for sale following another reputational crisis involving weeks of investor pressure over its failure to appropriately deal with a sexual harassment complaint.
Charlotte is a reporter for The Age.