Financial advisers working under AMP-owned advice groups have filed an open class action against AMP Financial Planning (AMPFP) in response to its move to cut adviser numbers and reduce the amount the group would pay for practices under its buyer-of-last-resort (BOLR) terms.
The action was filed by legal firm Corrs Chambers Westgarth in the Federal Court and is being supported by The Advisers Association (TAA), which represents advisers in the AMPFP and Hillross Financial Services advice businesses.
TAA chief executive Neil Macdonald said the class action was a result of the BOLR terms being reduced, without notice, from four times recurring revenue to a maximum of 2.5 times recurring revenue.
Macdonald said TAA members had purchased advice businesses from AMPFP at four times recurring revenue based on the promise within the BOLR terms that they would receive the same multiple back when they sold the business to AMPFP and the fact this was a key part of the advice group’s ecosystem.
“These are businesses that were valued by AMPFP for lending purposes at four times recurring revenue and in most cases were funded by AMP Bank loans or via another tripartite banking arrangement, again at four times recurring revenue,” he said.
“In many cases advisers had to put up their family homes as security and are now at risk of losing them. Many of our members stated they had little choice but to join the class action.
“We would have preferred, and we continue to prefer, that AMPFP work with the association to negotiate fair and reasonable outcomes for all members.
“This is obviously imperative for those who are exiting, but it is just as important to those who are staying so that they can continue to provide Australians with affordable access to financial advice.”
The BOLR issue has also been raised with the Australian Small Business and Family Enterprise Ombudsman, which has referred more than 60 cases for mediation following the receipt of more than 100 complaints from AMP financial planners related to the changes.
