Thursday, 27 July 2006 06- LAWFUEL – Press Release Service – The Australian Securities and Investments Commission (ASIC) today accepted a legally binding commitment from AMP Financial Planning Pty Limited (AMPFP) to modify key aspects of how it provides financial advice to its customers. The Enforceable Undertaking (EU) offered to the regulator by AMPFP follows an extensive surveillance of its operations by ASIC between 1 October 2005 and 12 April 2006. During this period, ASIC reviewed 300 files selected from 30 AMP Planners chosen at random. ASIC’s analysis of the files (which primarily related to superannuation switching advice) and subsequent investigations found that on many occasions, AMPFP: �� Planners’ files did not disclose a reasonable basis for advice; �� failed to make proper disclosures about the costs of acquiring the recommended product and the significant consequences of replacing the existing product; �� made statements on its website and in its Financial Services Guide that suggested AMPFP Planners could consider a broader range of products than permitted, which could have misled consumers; and �� may not have had adequate arrangements in place to manage conflicts of interest.
The EU offered by AMPFP sets out how it intends to rectify these issues and how it will provide suitable redress for clients who received advice which did not have a reasonable basis. ASIC Chairman, Mr Jeffrey Lucy, said the EU was the most appropriate, comprehensive and efficient way for ASIC to ensure that clients were able to pursue recourse. ‘It was important for ASIC that the outcome of the AMPFP matter be considered not only from a regulatory perspective, but also from the perspective of the clients and their need to be able redress any detriment. Taking the matter to court would not have allowed that to occur, which would have been a far less beneficial outcome for AMPFP customers,’ Mr Lucy said. Mr Lucy said he was confident the changes to its business systems offered by AMPFP would rectify the issues ASIC had found.
‘ASIC acknowledges the scale of the process now before AMPFP in respect to redesigning compliance and training systems, lifting its standards of disclosure and properly managing conflicts of interest. ‘The EU offered by AMPFP commits the company to major compliance improvements and ASIC regards these commitments, and the overhaul they represent, as a positive development for the financial planning industry,’ Mr Lucy said. AMPFP will appoint an independent expert who will review the effectiveness of the actions undertaken by AMPFP. AMPFP must consider any recommendations and, as appropriate, provide to ASIC a Remedial Action Plan to rectify any deficiencies. AMPFP will then be reviewed by the expert to assess if the Action Plan has been effective in raising compliance standards.
Mr Lucy said raising the quality of financial advice remains the focus of ASIC’s activities in the financial planning industry. ‘How planners are paid is a matter for individual licensees – not ASIC. Our focus is on the quality of advice presented to the client and full disclosure of remuneration not the basis of that remuneration.
‘This EU sends an important message to the financial planning industry. The message is that licensees must embrace the cultural change mandated by the Financial Services Reform Act. ‘That cultural change has placed great emphasis on disclosure and advice that is formulated with the clients’ needs and circumstances as fundamental. Where we find licensees are not conducting themselves in line with this cultural change, we will act,’ Mr Lucy said. Background Of the superannuation switching advice files selected, ASIC found that 45% failed to adequately disclose a reasonable basis for the advice. AMPFP will now write to affected clients, in a form agreed by ASIC, offering to review the advice they received.
If a dedicated resolution team can find no reasonable basis for the advice, clients will be offered an alternative, which will include a refund of the AMP Planner’s adviser fees and any exit/entry fees that may have been incurred and a transfer to the fund of their choice. The Enforceable Undertaking offered by AMPFP is a public document and is available at www.asic.gov.au. For further information contact: Jennifer O’Donnell Executive Director, Compliance Telephone: 02 9911 2123 Mobile: 0411 549 257 Angela Friend ASIC Media Unit Telephone: 03 9280 3338 Mobile: 0412 058 800