Thursday 6th July 2023
'Unconscionable conduct': AMP lambasted in first round of BOLR battle
The judge was satisfied that Equity suffered "loss and damage" as a result of AMPFP's breach of contract, while the language used for the licensee's treatment of Wealthstone was even stronger. AMP acknowledged the result, and did not rule out an appeal.
A federal court has found in favour of two former AMP financial advice practices in their efforts to hold licensee AMP Financial Planning to pre-existing buyer-of-last-resort (BOLR) agreements, which could provide a precedent for similar cases.
On Wednesday Judge Hon. Justice Moshinsky ruled that AMPFP had breached the terms of the BOLR agreements, after the licensee changed its long-standing policy to buy AMP advice businesses at 4X revenue multiples to 2.5X revenue based on “economic change” within the market.
It’s alleged the abrupt reversal of its BOLR policy forced dozens of advisers to sell their business with residual debt after they had taken loans based on an agreement that, as a ‘last resort’, the practice could be sold back to AMP at the agreed multiple.
The court ruled in favour of the two group members, with $813,560 awarded to lead applicant Equity Financial Planners and $115,533 awarded to sample group Wealthstone.
Worth noting is that Equity did not partake in the amended BOLR offer, while Wealthstone did.
The judge was satisfied that Equity suffered “loss and damage” as a result of AMPFP’s breach of contract. The language used for the licensee’s treatment of Wealthstone was stronger, with the licensee’s conduct described as “in all circumstances, unconscionable”.
In a statement released to the ASX, AMP acknowledged the decision and did not rule out an appeal, noting that the ruling only applies to the defendants – for now at least.
“The court determined amounts payable to the lead applicant and the sample group member only,” AMP’s statement to the ASX read. “Subject to any appeal, a process will be required to determine the impact of the decision on other group members.”
AMP said it will review the judgement in full to determine its “full effect” and provide an update in due course.
AMP’s member-based representative group, The Advisers Association, welcomed the ruling, with CEO Neil Macdonald saying he was “pleased for our members”.
Shares in the wealth manager dropped 6 per cent in the day’s trading subsequent to the announcement to finish at $1.07.
AMP’s shares peaked at $13.57 in May 2001 and were still worth over $10 before the GFC in 2008.
