Former AMP customers and consumer rights groups have been outraged by the troubled wealth manager’s latest tactic to delay returning money it stole in the fees-for-no-service scandal.
The banking royal commission found charging fees for no service was “taking money for nothing” and AMP is putting that money into new accounts and charging new fees.
AMP has been forced to refund hundreds of millions of dollars in fees and charges it took from clients following scandalous revelations at the royal commission.
Late last year, AMP started to contact former clients to alert them it owed them the money it took in fees while providing no service.
However, instead of asking customers where they would like the money sent, AMP opened a new super account in their name.
“As your account with us is closed and we can’t pay super benefits directly to you, we’ve paid this amount into a new AMP Eligible Rollover Fund [ERF] account that was opened in your name,” it told them.
AMP move slammed as ‘simply unbelievable’
The strategy of opening new accounts has shocked regulatory and corporate governance academic Andy Schmulow, who lectures at the University of Wollongong and is an adviser to the World Bank on market conduct rules.
“It is simply unbelievable that after the horror show of the royal commission, AMP has learned nothing, it hasn’t changed, won’t change and demonstrates that the company no longer has the right to exist,” Dr Schmulow said.
An independent advocacy centre for superannuation customers criticised AMP’s move as a shameless grab for new accounts that could be sapped of fees.
“This is absurd – people left the fund because it was ripping them off, they’re now being forced to re-join to get their money back,” Xavier O’Halloran from Super Consumers Australia said.
“To make matters worse, they are being thrown into an AMP fund which has massively underperformed comparable funds over the longer term.”
The AMP ERF has performed poorly, returning just 2.6 per cent over the past decade, significantly underperforming other ERFs in the market, which have a median return of 4.6 per cent, according to APRA data.
Clients who have had money taken from them by AMP have had the money they are owed put in the second worst-performing fund in the category.
“The fund’s rate of return of 1.1 per cent over the last year was below inflation and had that money gone directly into a balanced MySuper account, they would have earned 6.89 per cent,” Mr O’Halloran said.
Refunded money to be charged fees
AMP’s letter states there are “no exit or entry fees” but says nothing about the fees charged while the account is open, which are quite steep.
Fees start at 2.36 per cent for “administration” and there is another 0.69 per cent investment fee.
These are far heftier than the fees charged by some of Australia’s top-performing investment funds, “which return in excess of 20 per cent”, Mr O’Halloran said.
“For people with low balances, this looks like a naked attempt by AMP to claw back its ill-gotten gains.”
AMP’s letter states in bold type that no action is required: “You don’t need to do anything – the payment has already been made.”
However, those payments were made to new accounts customers did not know anything about.
Former client furious money back with AMP
Two months after the first letters were issued, AMP sent welcome packs to clients, including information about the ongoing fees and a form to fill in to move the money and close the new account.
One former client of AMP told the ABC they were furious AMP had set them up with an account without their consent and lumped them with the hassle of now applying to get their money out of the account and closing it.
“This is bulls–t,” the former client said.
Mr O’Halloran said: “People would have been much better off being reunited with the money AMP stole from them by having it put into their existing super accounts.”
Dr Schmulow highlighted that AMP’s financial success rested on it opening new accounts and keeping funds within the institution.
“If there was anybody at AMP that said opening new accounts with the stolen money is a clever strategy of keeping funds under management, they should have been sacked. This is so bad,” he said.
“They obviously have these former clients’ details – addresses, emails, phones. It’s clear they put no effort into actually trying to give people their money back.”
While regulator ASIC has published detailed instructions on how it expects firms to review files and assess whether compensation or remediation is warranted, it does not have the power to tell companies how to do it, just that it should be in a “timely manner”.
In March last year, ASIC commissioner Danielle Press criticised banks, including AMP, for delays in reimbursing customers.
AMP responded to the ABC’s questions about why it didn’t first contact former clients before setting up new accounts on their behalf by saying the practice was legal.
It declined to say how many new accounts had been set up, or why information about moving the money into another super account wasn’t included in earlier correspondence.
“Remediating customers as quickly as possible is our priority – for members without a current AMP super account, payments were made through an eligible rollover fund (ERF), which was the fastest way to return money to clients and meets the legal requirement for the money to remain within superannuation,” an AMP spokesman said.