Financial services giant AMP has admitted to putting short-term profits ahead of the interests of its customers and its obligation to obey the law, in another dramatic morning of evidence at the banking royal commission.
The admission, made on Tuesday morning at the Commonwealth Law Courts in Melbourne, drew yet more attention to Australia’s scandal-ridden financial advice industry, five years after sweeping reforms were introduced to clamp down on dodgy advice practices.
AMP’s head of financial advice Anthony Regan conceded the company’s conscious decision to charge fees to clients who were no longer receiving financial advice, and then lying or misleading the regulator about the practice, was illegal and exposed serious cultural problems in the company.
Mr Regan admitted at least 20 emails sent to the corporate watchdog ASIC were “false or misleading”.
Senior counsel assisting Michael Hodge, QC, asked what these emails said about AMP’s culture, to which Mr Regan responded:
I think there are reasons to be concerned. I think they show a culture that’s not as robust as it should be.
“I think that the culture certainly needs to be reveiewed and analyzed and we are doing that. In fact there was a review of the culture done in 2015. But I think the concerns there are obvious.”
Mr Hodge responded: “When you say ‘not as robust as it should be’, what we seem to be seeing is that a conscious decision is made to protect the profitability of AMP at the expense of complying with AMP’s licence. Do you agree?”
“Yes, I believe that’s what that shows, yes,” Mr Regan said.
He went on: “[I]t’s clear that we preferenced the interest of shareholders in that exchange at the expense of clients. And so that is a concern.
“But I think there are other elements there that are concerning as well.
“I think there is clearly a lack of clarity in terms of the way in which directions have been given, but also there’s a concern about the degree to which things should have been escalated as a result of the issues being identified further down.”
Mr Hodge then asked whether the decision to prefer the interests of shareholders was also at the expense of complying with the law, to which Mr Regan replied: “Absolutely.”
“And although you say its preferencing the interests of shareholders, by that I take it you mean at least in the short-term of maintaining the profitability of the company at the expense of complying with the law,” Mr Hodge said, to which Mr Regan again conceded.
“Is it in the long-term interests of AMP shareholders for AMP to be maintaining its profitability at the expense of complying with the law?” Mr Hodge asked.
“It is not,” Mr Regan replied.
Further questioning revealed that AMP, which along with the big four banks is one of the biggest providers of financial advice in the country, was continuing to generate the majority of its adviser revenue through commissions rather than fees – almost five years after the FOFA reforms supposedly banned commissions.
The next two weeks of hearings will focus on the financial advice industry, with representatives of Commonwealth Bank, ANZ, NAB and Westpac all due to appear before the commissioner.