AMP fronts reps over buyer of last resort deals

Matthew Smith

By

May 24, 2018

Michael PaffMichael Paff: Fronting AMP rep practices

AMP Financial Planning managing director Michael Paff is going state to state, visiting a number of the company’s approximately 1500 practices, while AMP executive director of advice Michael Guggenheimer remains on extended leave.

An AMP spokesperson couldn’t confirm whether Guggenheimer, whose position entailed establishing AMP’s licensee boards and maintaining governance standards, would return to the group. The spokesperson had no official comment regarding the conditions of Guggenheimer’s extended leave or Paff’s discussions with representative practices.

Michael Guggenheimer

Michael Guggenheimer: on extended leave

Paff, who in March 2017 was put in charge of the combined AMP Financial Planning, AMP Advice, AMP Horizons and AMP Direct business units, has been fronting representatives of AMP’s sprawling financial planning network in their own offices during May. At last count, AMP’s licensee network accounted for 2,867 advisers, 456 of whom are Certified Financial Planners.

Buyer of Last Resort

Paff’s main goal during his meetings with representative businesses, most of which operate under their own brand names distinct from the AMP brand, has been to address the revelations from the royal commission and confirm that Buyer of Last Resort (BoLR) arrangements remained in place.

It is understood Paff discussed BoLR with the principals of the group’s larger practices. Professional Planner has spoken to no AMP practices that have suggested they are in any rush to exercise their BoLR arrangements.

BoLR is the deal representatives under the AMP licence have with the licence owner to sell their advice practices back to the business for a multiple of recurring revenue.

The terms of the individual BoLR arrangements will differ from practice to practice. It is understood the company’s BoLR terms were revised in 2017 to align with contemporary regulations and include factors such as record keeping and compliance standards.

The recurring revenues valuation methodology has been superseded in the broader marketplace for financial planning businesses with a multiple of earnings before income and tax, which is generally considered to be a more contemporary arrangement.

Paff reported to Anthony ‘Jack’ Regan, group executive advice and New Zealand, who is known widely for his appearance in the second round of hearings at the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

The fee-for-no-advice scandal revealed during the royal commission has enveloped AMP, the largest brand in insurance and wealth management in the country. Since the airing of the details of the scandal, AMP chief executive Craig Meller has stood down, followed by chairman Catherine Brenner and general counsel Brian Salter. Last week, Pally Bargri, the chief risk officer for the advice division, announced his resignation publicly, on LinkedIn.

Contingent liabilities 

In recent weeks, AMP’s share price has taken a hit, particularly as more detail around the company’s contingent liabilities relating to its BoLR arrangements have come to light.

In early March, in the lead up to the royal commission hearings, AMP’s share price was about $5.50 a share. On May 11, AMP stock sank to its lowest point, at $3.73 per share, or more than 32 per cent lower than the pre-royal commission trading price. AMP was trading around $3.93 a share on Thursday afternoon.

A Morgan Stanley research report published on May 11, penned by analyst Daniel Toohey, outlined that about $474 million of advice fees and $1.4 billion in BoLR contingent liabilities were at stake if Hillross and AMP Financial Planning practices decided to leave the licensee.


TOPICS:   AMP,  AMP Advice,  AMP Financial Planning,  Anthony Jack Regan,  buyer of last resort (BOLR),  Michael Guggenheimer,  Michael Paff

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