Royal Commission Q&A
What are the aims of the Royal Commission?
The Commission has been asked to inquire into and report on misconduct in the banking, superannuation and financial services industry. It focuses on whether companies in these industries have conduct, practices, behaviour or business activities that fall below community standards and expectations.
What will be the outcome of the Royal Commission?
The Commissioner is expected to make an interim report later this year, with a final set of recommendations to be delivered to government in early 2019.
Were you surprised by the revelations at the Royal Commission?
Absolutely. We have been both shocked and dismayed by these revelations and the practices of some within our industry.
What is the financial link between WealthPartners Financial Solutions and AMP Financial Planning (AMPFP)?
As a Financial Planning firm, WealthPartners Financial Solutions act as an Authorised Representative of a Licensee (as is required by law). AMPFP is licensed via the Australian Securities and Investment Commission in accordance with the requirements of Corporations Law. In our case AMPFP is our Licensee.
Are WealthPartners obliged/incentivised to recommend AMP products?
No, WealthPartners Financial Solutions operates under strict legal obligations which include the requirement to act in the best interests of our clients at all times.
What is the fee for no service issue?
The Commission heard about a specific issue within AMP’s advice business and a range of other Financial Service providers in which fees had been charged to customers for services they didn’t receive. The Australian Securities and Investment Commission (ASIC) has been investigating the issue but has not yet reached a conclusion.
The fees for no service issue includes the inappropriate charging of ongoing service fees by advisers, as well as a licensee business practice (such as AMP, ANZ and CBA) to leave the fees on for a period of 90 days while clients were transitioning between advisers.
AMP acknowledged that this practice was not appropriate. This was stopped in November 2016 and AMP have apologised and paid compensation to all affected customers. 15,712 AMP customers were identified and $4.7 million fees have been refunded to date.
The way AMP reported the practice to ASICas required under the law before it was stopped was misleading. AMP did not provide ASIC with accurate or complete information about this practice in a timely manner. As highlight in the Royal Commission hearings, this is unacceptable.
Why did AMP’s Chairman and Four Directors resign?
AMP’s CEO, Chairman and 3 other Non-Executive Directors have resigned to accept accountability for issues that happened during their leadership.
The AMP Board has appointed an Executive Chairman, Mike Wilkins, to drive a comprehensive review of AMP’s regulatory reporting and governance processes. Mike has a great deal of experience in leading large financial services companies, including 20 years’ experience as a CEO. He most recently served as CEO of Insurance Australia Group Limited (IAG).
I have an AMP policy. Will this have been affected by the Royal Commission?
The Royal Commission does not have a direct impact on AMP’s policies.
AMP Insurance is one of Australia’s largest insurers with more than two million customers. It has reinsurance agreements with two of the world’s largest reinsurers.
AMP Bank is a well-capitalised, leading second-tier bank.
Is my Superannuation safe?
Super is strictly regulated to protect customers’ interests. The way super money is held and invested is carefully controlled and there are checks and balances at every stage.
The trustee of the super fund is responsible for operating a super fund and has a legal duty to manage the super fund strictly for the benefit of members (above the interests of shareholders). The trustee must:
- manage investments properly
- employ qualified fund managers
- keep fund assets separate from its own assets
- manage the super fund for the benefit of members
- manage any conflicts of interest
- treat members fairly
- safeguard members’ interests against fraud and other adverse situations
- meet certain financial requirements.
The powers of a trustee and the rules the trust operates under are set out in the Trust Deed.
Is the AMP situation affecting the overall value of my portfolio in my investment or superannuation fund?
No, for those using our Model Portfolios. We build our Investment portfolios in conjunction with our independent research house Zenith. Zenith have advised that there is no exposure to AMP Ltd in any of our Model Portfolio Australian Share funds.
The portfolio can include AMP Capital who is a large global investment manager headquartered in Sydney, Australia. AMP Capital have featured within our Model Portfolios in the past such as AMP Australian Bonds, Listed Property and cash. None of which have exposure to AMP shares.
How much AMP stock is held in AMP Capital’s investment funds?
For those not using our Model Portfolios and are invested in other AMP Capital Investment funds, AMP Capital offers a broad range of investment options and some of these investment options have an investment in AMP shares.
AMP Capital investment options have an exposure amount of less than 2% across all their available investment options.
Will the investment performance of my portfolio be impacted?
Investment performance is largely driven by the performance of the investments held within your portfolio. AMP’s share price fall would only impact to the extent that you may hold AMP shares within your portfolio.
AMP super, pension and investment products are invested in a broad range of assets, e.g. property, Australian shares, and international shares.
Am I obliged to have AMP Investments within my investment portfolio?
No not at all. We use highly regarded “best of breed” managers to generate returns in accordance with our investment philosophy. Our track records indicate that we use an array of investment managers and rarely include AMP Capital investment options in our Model Portfolios. We build our Investment portfolios in conjunction with our independent research house Zenith who is unbiased in its approach to investment managers.
If I no longer wish to have fund invested via an AMP Investment platform or AMP investment option, can I change this?
Yes. We would work with you as part of our ongoing advice relationship to determine an appropriate alternative product or strategy. This is already considered as part of a regular review process.
I heard class actions have been filed against AMP. What is a class action?
A class action is a legal proceeding that involves a large number of people who allege they have a claim against a company or person. Class actions can be launched over many different things, including by a company’s shareholders who believe their shareholdings have been devalued by an action of the company.
AMP has been served with two class actions and have advised they will vigorously defend these matters.