AMP hit with Federal Court suit

The Australian 4:21pm June 27, 2018

Michael Roddan

Under pressure wealth manager AMP is facing civil claims in the Federal Court that its advisers were shunting customers into life insurance policies against their best interests, in order to win lucrative commissions.

In claims that had not yet been aired by the royal commission into banking and financial services, AMP has been taken to court by the Australian Securities & Investments Commission over claims it failed to prevent its financial planners from churning customers into new life insurance policies.

ASIC has alleged financial planners engaged in “rewriting conduct” where they gave customers advice that saw them cancel their existing life insurance policy only to take out similar replacement policy through a new application, rather than a transfer.

By doing this, financial planners stood to receive larger bonuses than they would have under a simple transfer. At the same time, customers were exposed to “unnecessarily to underwriting and associated risks”, ASIC said.

AMP is alleged to have known, or ought to have known, about this behaviour by July 2013. However, ASIC said AMP did not take reasonable steps to deal with the conduct in the two years to the end of June 2015.

“ASIC alleges that this type of advice was inappropriate, and that the financial planners failed to act in the best interests of the clients and to prioritise the interests of the clients,” the regulator time.

The case will rely on the client files of a number of AMP customers, including that of banned planner Rommel Panganiban, who was suspended from the industry in 2016.

ASIC will also allege AMP breached parts of the Corporations Act that require efficient, honest and fair provision of financial services. The case will have a directions hearing on July 27.

AMP is still being investigated for the scandals revealed in the royal commission, including its conduct during the fees-for-no-service disaster and in relation to making false and misleading statements to ASIC over its conduct regarding the doctored Clayton Utz board report.