AMP’s Woes Continue
The banking and financial services sector has been turned upside on account of the Royal Commission. Arguably facing the most repercussions, AMP has seemingly damaged their reputation in the eyes of the financial industry. Profits plummeted in 2018 following the announcement of the Royal Commission, however, the financial services company is finding themselves in more hot water after news emerged that they are facing their second class action in 2 years. Reputable law firm Maurice Blackburn is continuing their engagement against AMP through filing their second class action, this time for charging excessive administration fees to superannuation members.
On What Bounds?
The wealth management firm is the first of its kind in Australia to be facing with 2 class actions in 2 years. AMP’s first disastrous foray in front of the Royal Commission was a result of misleading customers and the Australian Securities and Investments Commission. Conversely, AMP’s return to the Federal spotlight is based on revelations by Maurice Blackburn that they charged excessive administration fees to their superannuation members’ accounts. Lead Plaintiff Sebastian Smith put the matter into perspective stating “Dishonest is dishonest … if you’re taking $10 a month off someone that 40 years later is worth $100 or $200 a month, then I think you’re taking $200 a month off them.”
Principal lawyer Brooke Dellavedova is spearheading the lawsuit against the already tarnished institution. Ms. Dellavedova claims that AMP charged up to three times more than advised in administration fees on their superannuation members’ accounts. Historically looking back to 2013, Ms. Dellavedova argues that AMP was applying fees of 1.5 per cent well above the industry-wide benchmark of 0.5 per cent, which in hindsight is what should have been charged. Objectively speaking, “if you had a super balance of say $100,000 in one year alone, that would be an overcharge of $1,000” she stated.
Implicitly speaking, Ms. Dellavedova believes that 1 million superannuation members or more specifically 2.5 million superfund accounts are affected by AMP’s misconduct. Separately, AMP formed an unlikely alliance with competing Lawyer firm Slater & Gordon to fight against AMP on behalf of shareholders over AMPs involvement of fees-for-no-service scandal. AMP was in this case, accused of charging their member’s a service fee for a service they never received. These actions conducted by AMP are now catching up to them, although already being suffering with enormous market adjustments they are now set to face legal punishments.
Ramifications of Class Action
Maurice Blackburn is pushing for AMP to wear the consequences of their misconduct. “People rightly feel very protective of their super” she said in light of AMP’s dereliction. A common fund is expected to be sought out by law firm, meaning affected customers would be compulsorily married to the class action unless they choose to opt out. Maurice Blackburn’s legal costs amount to 15% of the total recovery amount. Looking forward, the class action is seeking “hundreds of millions of dollars” in compensation, making it obvious that damages against AMP could be “very, very significant,” according to Ms. Dellavedova.
Maurice Blackburn entrenches their position by seeking to atone AMP’s wrongdoing. Ms. Dellavedova upholds her point stating, “Our intent is to return customers to the position they would have been in if the issue hadn’t occurred, having regard to regulatory guidelines.” Further evidence presented by Sebastian Smith said he “no idea” of how much of his future wealth he had lost as a result of the exuberant fees after joining the superfund. Smith added that AMP was the default provider for his employer. Ideally, Smith suggested that “everyone gets all the money back they should have, and it (should be) calculated on what that would have been worth at retirement age”, something that will be supported by Maurice Blackburn.
On a larger scale, AMP has already suffered the consequences of its actions. AMP’s share price since early March 2018 has dropped from $5.43 to $2.17 as of 31 May 2019 highlighting a 60% decline. Net profits slid from $848 million to just $28 million with customers withdrawing their funds and taking them elsewhere. Numerically, investors extracted almost $4 billion of cash out of AMP’s wealth management division, believed to be redirected into industry superannuation funds.
Is There a Silver lining?
With consideration of all the preceding events, a statement made by AMP confirms that the proceeding will be vigorously defended. Attempting to repair their image, AMP spokeswoman said “AMP is a major institution with the ability to remediate customers in the event there is an issue”. Reaffirming their commitment to settle their malpractices, AMP spokesperson conclusively stated “Our intent is to return customers to the position they would have been in if the issue hadn’t occurred, having regard to regulatory guidelines”.
By Nicholas Psaltis
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