The Bull

Monday 18

February, 2019 5:52 AM



AMP underestimated size of its fees issues

AMP underestimated size of its fees issues

AMP is accelerating its remediation program for customers charged fees for no service or for inappropriate advice.

Share |

By AAP 27.11.2018 06:42 PM

AMP underestimated the scale of its fees-for-no-service problems that it at one stage feared could end up costing more than $1 billion.

Australia's largest wealth manager now plans to accelerate its compensation program but still faces a hefty $778 million bill.

AMP's acting CEO Mike Wilkins said the group did not fully appreciate the size and complexity of the fees-for-no-service issue when it was discovered in 2016.

"I think that AMP believed, as did the industry, that this was not such a large issue," he told the banking royal commission on Tuesday.

Even before AMP's fees scandal aired at the royal commission in April, its board was becoming increasingly concerned that the remediation process was proceeding too slowly.

AMP initially thought its remediation program could be completed in five years.

It then realised it would take nine years to complete at a cost of $1.185 billion.

In the most extreme cases, it would have meant customers charged fees when no advice service was provided in 2008 had to wait up to 17 years for a refund.

Mr Wilkins said the time frames were unacceptable, not only because of what the community expected.

"There's certainly a community expectation about that, but it was more important to AMP that customers be remediated as quickly and as completely as possible," he said.

AMP has now changed its approach, dedicating 150 staff to the remediation with the expectation that it will be completed within three years.

It has estimated it will cost $778 million to complete the remediation program for clients given inappropriate advice or charged fees for no service.

It expects to pay $440 million to clients, mostly for fees for no service, but is still reviewing the files of more than 217,000 customers.

AMP will not begin refunding customers until it has reached agreement with the corporate regulator on its approach, but has backed down on its attempt to exclude clients who paid under $500 a year in fees.

At the same time, AMP has revealed it may have another potential fees-for-no-service problem and is reviewing charges to employer superannuation plans since 2008.

It has found issues with the management and monitoring of fees charged to workplace superannuation members and those received by AMP advisers, the inquiry heard.

The fees-for-no-service scandal revealed at the royal commission in April led to the departure of AMP's CEO and chair, as the inquiry's barristers suggested AMP face criminal charges for lying to the corporate regulator.

Archive
  • Trump to get update on China trade talks

    US duties on $US200 billion worth of Chinese imports are set to rise to 25 per cent from 10 per cent if no deal is reached by March 1 to address US demands

  • SA govt unveils Repat Hospital plan

    The South Australian government has unveiled its master plan to redevelop Adelaide's Repatriation Hospital.

  • US-China talks to boost Aussie market

    Australia's share market is tipped to open higher on Monday after optimism surrounding US and China trade talks.

  • The Week Ahead

    In Australia, the December quarter Wage Price Index release dominates the local agenda in the coming week.

  • ASX closes flat as more companies report

    The Australian sharemarket has managed to finish in positive territory as more companies reported earnings results.

  • Stocks to watch

    Stocks of interest at the close of trade on the ASX on Thursday, February 14.

  • Germany to let NATO use its cyber skills

    Germany is to join the ranks of NATO countries making its cyber warfare skills available to the alliance to help fight hacking and electronic warfare, officials said on Thursday.

  • Domain posts $156.4m loss as listings fall

    Domain's first-half loss has widened to $156.4 million after Sydney and Melbourne's stumbling property markets forced it to take a large non-cash impairment.

  • Farmer denies scaring vegans with gunshot

    A WA farmer who asked vegans to stop filming calves on his property and leave, then fired a shot into farmland, says he wasn't trying to scare them.

  • CommSec Daily Report Friday

    The local sharemarket is mostly flat so far in a choppy session of trade. The ASX 200 is marginally higher by 6 points or 0.1% to 6066 points towards lunch after trading in a narrow 18 point band...

Markets
Index: Points Change Percent

PLEASE SUPPORT OUR SPONSORS, AUSTRALIA'S LEADING BROKERS:



© Copyright TheBull.com.au. All rights reserved.