The drama and turmoil surrounding AMP’s Buyer of Last Resort scheme stems from a longstanding position AMP has held in relation to its financial advisers, namely, that AMP retains “ownership” of the clients of the advisers it authorises.

This has led to several other issues in later years including, but not only, AMP finding itself with a significant number of clients who no longer had a relationship with a financial adviser, but whom it continued to charge fees without delivering services.

But on the BOLR front it meant if an AMP adviser wanted to sell an advice practice, they had to find a buyer willing to accept that AMP owned the practice’s clients. It meant it was often easier to sell the business to another AMP adviser, who already understood and worked with the AMP relationship, than it was to sell it to an adviser authorised by another licensee.

And if the adviser couldn’t find a buyer in-market or within the AMP network, they had the option of selling the practice and the clients back to AMP itself at a multiple of four times recurring revenue.

While it was referred to as a buyer of “last resort” scheme, in practice the terms of the BOLR were frequently significantly more attractive to a vendor than a sale to another adviser, so for some it became a buyer of first resort scheme, as it were.

The scheme also made sense for AMP at the time, because – say it quietly – some financial institutions thought of financial advisers in terms of product distribution, and they paid sales commissions to encourage advisers to shift product. If a product wasn’t particularly attractive in terms of structure or even performance, no matter: crank up the commission, someone will sell it.

If the products being sold by AMP advisers were AMP products, it made commercial sense for AMP to protect its distribution by offering an attractive BOLR facility, with the calculation of revenue for sale terms favouring in-house products.

But the world changed, and in 2019, AMP sought to change the terms of its BOLR contracts with advisers. BOLR was in many ways the last gasp of the vertically integrated model. It became unsustainable when it was no longer permissible to incentivise advisers to sell product from just one institution, and when trailing commissions vanished.

Principally, AMP wanted to reduce the multiple of revenue from four times to something a bit more in-line with the new reality of no trails. It also changed the terms so that the calculation didn’t include only AMP products.

But some advisers – and it must be stressed, only some – saw BOLR as effectively their superannuation plan. If they could spend a career building practice revenue, and they didn’t even need to think too hard about profit, they could create something to sell back to AMP at four times that revenue figure and do very nicely. Some did exactly that (and AMP inherited their clients).

When AMP sought to change the terms of the BOLR contracts in August 2019, some advisers saw value evaporate before their very eyes. There was an argument as to whether AMP had the right to vary the terms, and whether it had consulted with advisers appropriately before doing so.

Some advisers were undoubtedly adversely affected by the change and had a genuine gripe about the process. This led ultimately to the class action launched against AMP and settled on Thursday for $100 million.

But others were affected a lot less by the BOLR changes because they’d already changed the commercial basis of their businesses to accommodate the demands of the post-FOFA (Future of Financial Advice reforms) and post-Hayne royal commission world of advice. In some cases, they were no longer even authorised by AMP.

That didn’t stop a few of them cropping up as participants in the class action, though, and they’ll seek to share in the settlement announced on Thursday. In effect they’ve had their cake and now they’re eating it too – but that’s a matter for their individual consciences.

For AMP, it is the last vestige of its old way of doing business and clears the way for CEO Alexis George and group executive for advice Matt Lawler to get on with things their way.

While the task ahead of them remains significant, there are many reasons why a vibrant, healthy and professional AMP financial advice business is good for the entire profession.

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