Banking royal commission: AMP advice led to loss of quarter of super account - Guardian ( source : Australian Associated Press )

Banking royal commission: AMP advice led to loss of quarter of super account
AMP says advice at odds with customer’s interests and man has not been compensated

Gareth Hutchens and Michael McGowan

Mon 23 Apr 2018 16.38 AEST Last modified on Mon 23 Apr 2018 17.38 AEST

 An AMP financial adviser told a man to consolidate his superannuation benefits into a single fund, which caused the loss of 25% of his super. Photograph: Scott Barbour/Getty Images
A man lost 25% of the balance of a superannuation account after being advised by an AMP financial adviser to consolidate his super benefits into a single AMP-owned fund.

AMP admits the advice was detrimental to the man’s financial interests but says he has not been compensated, nor even contacted about the issue.

The fourth week of public hearings for the banking royal commission began on Monday, with AMP back in the witness box.

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AMP’s former chief executive Craig Meller was stood down immediately after a company executive admitted in the royal commission last week that the company had repeatedly lied to the regulator about charging customers fees for no service.

On Monday the law firm Quinn Emanuel Urquhart & Sullivan said it was considering a possible class action against AMP, looking to hear from shareholders who have seen the company’s stock plummet in the last week.

AMP shares lost more than $1bn in market value last week after the damning evidence presented to the financial services royal commission.

On Monday, AMP’s head of compliance, Sarah Britt, appeared as a witness at the royal commission to respond to questions about the behaviour of a former AMP financial planner.

Rowena Orr, the senior counsel assisting the royal commission, asked Britt about a financial adviser called “Mr E”, for legal reasons, who advised a husband and wife couple to rollover their non-AMP super accounts into a single AMP-owned fund, My North Super, in 2016.

The husband was advised to rollover and consolidate his super benefits from two non-AMP funds, TAL Super and MLC MasterKey Superannuation.

The husband had $68,000 in TAL Super and $73,000 in MLC Super, and was advised to put the balance into My North Super.

In doing so, he had to pay TAL Super an exit fee of $16,189, meaning he lost roughly 25% of his TAL Super balance ($68,000).

A document tendered to the royal commission showed the husband was informed he would lose $16,000 in exit fees because he had not met certain TAL Super conditions but he was told his super benefits would be invested in My North Super’s “Xenith Model portfolio”, which would “provide you better performance so that you could earn more”.

But the financial adviser made no attempt to compare the likely returns from remaining in the TAL Super with the likely returns from moving to My North Super.

Orr asked Britt: “So the advice to the husband from Mr E was to sacrifice close to 25% of the balance of the fund so it could be transferred to My North Super?”

Britt replied: “Yes”

Orr said: “Would you agree that unless the TAL’s funds returns had been, or were likely to remain very significantly lower than the likely My North Super returns, it could not have been in this client’s interest to lose a quarter of their superannuation fund?”

Britt replied: “Yes, that’s right. So unless there were significant benefits that would outweigh the exit fee, um, then yes, correct.”

Orr then asked: “And were there significant benefits that outweighed the exit fee?”

Britt said: “Based on the documents I’ve seen … I couldn’t identify what those benefits were.”

The royal commission heard Mr E was first audited by AMP in September 2016, two months before he advised the husband and wife couple.

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That audit resulted in a C rating, meaning the adviser met all of AMP’s major quality advice principles while some areas of improvement were identified.

He was audited again in March 2017 and given an “E” rating – the worst rating possible – because he failed to meet the minimum standards required for providing advice, but he was not sacked.

The licensee that employed the adviser did not want to sack him, saying he was relatively new and junior. AMP agreed to continue using him, with some restrictions in place. But the adviser’s employer sacked him in August 2017.

The husband and wife client of Mr E have still not received compensation, nor been contacted by AMP to be told they received bad advice.

Britt said that was because the case has been moved into their “remediation program” with every other client on Mr E’s book, along with clients from other advisers.

Britt said AMP had remediated clients of 14 advisers so far. She said she didn’t know how many advisers were subject to AMP’s remediation program.

Britt said AMP blamed Mr E and his employer for giving bad advice.

Orr asked: “Does AMP accept any responsibility for the provision of inappropriate advice by Mr E, its authorised representative?”

Britt did not answer the question directly, saying the adviser had been picked up by AMP’s risk controls.

“In that sense, we would say that we’ve discharged our monitoring and supervision obligations with respect to this adviser,” she said.

Orr asked: “So do you maintain that there was no failing in AMP’s systems and processes?”

Britt replied: “We would maintain that we have a robust system of detecting and if necessary terminating advisers who are providing deficient advice.”

She admitted AMP had made no changes to its processes as a result of Mr E’s conduct.

With Australian Associated Press