2019-10-22 09:46:421970-01-01 00:00:00

AMP Admits Policy Breach

In light of the infamous royal commission report published in February 2019, the financial industry has been subject to increased scrutiny with the corporate watchdog ASIC tightening its regulatory grip. The corporate regulator’s tougher enforcement guidelines have notched its first victory with the already tarnished AMP admitting to failing to ensure its advisers were acting in the best interest of their customers. AMP admitted to having financial planners ‘churning’ existing customers, which involves re-writing or cancelling their life insurance and take out a new cover. As unethical as churning is, it also exposes the customer to underwriting risks.

Costs to AMP

Financial advisors employed by wealth management giant AMP who failed to act in the best interests of the customer have further damaged the already blemished reputation. Post the royal commission hearing AMP’s market value dropped to $6.6 billion, full-year profit also plummeting 97% as of December 31 to $28 million and the share price is near a record low of $2.25 at 21 May.  To add to this, AMP is now suffering the consequences of “Churning” where advisors cancelled policies with the intention of increasing their commissions. To do this, they would open up new policies unnecessarily for the customer. Committing these contraventions is expected to cost AMP $1 million per offense.

The silver lining of AMP admitting to failing to keep their planners in line and acting in the best interests of their clients results in a simpler punishment process. ASIC deputy chairman Daniel Crennan, QC, stated “AMP has now admitted to all of these contraventions and ASIC will ask the court to make declarations of contravention and order AMP to pay a penalty.” Ultimately this means that the issue will be resolved much sooner relative to the repercussions, Crennan furthering, “If the matter was fought on liability.”  If ASIC had found the violations in the June hearing in 2 weeks before AMP’s admittance, there would have been more litigious actions taken. The severity of the matter is still immense, but AMP has somewhat saved themselves further punishment by admitting to the contraventions.

ASIC’s Contribution

ASIC’s insight on the financial industry has resulted in shocking revelations of the conduct on financial companies. For instance, AMP was charging life insurance premiums to dead clients and blaming administrative errors for these ongoing fees when it was actually conscious decisions. Creenan stated “ASIC’s case argued that AMP, one Australia’s largest financial institutions, failed to ensure its financial planners acted in the best interests of their clients as well as other contraventions of the law.” Having ASIC on AMP’s back with the court hearing in June 2019, it forced them to basically admit that they failed to take the necessary steps to ensure 4 of their  planners acted “efficiently, honestly, and fairly” and within the law between 2013 and 2015.

During the Royal commission, ASIC was criticized for relying more on enforceable undertakings instead of taking the respective cases to court and finding out these contraventions earlier. This came down to “ASIC having limited funds for enforcement” stated by Swinburne University corporate governance expert Helen Bird. Since the last federal budget, ASIC has been given more than $400 million in additional funding, reducing the ‘can’t afford to lose’ mentality, enabling ASIC to be more proactive against the war on unlawful actions.

AMP’s cooperation with ASIC

AMP has been proactive in helping ASIC come to a resolution and to an extent, arbitrate the actions conducted by their employees. It has been noted by AMP spokeswoman that the company, in consideration of the past events have enhanced their monitoring and supervision processes. AMP has incorporated stronger data analytics to help protect clients against further insurance rewriting as well as terminating the 4 now publicly disgraced planners for actively churning some 40 life insurance customers to reap in commissions.

Furthermore, ASIC’s ‘why not litigate’ strategy can been explained the forefront reason why AMP came out with the self-damaging allegations. ASIC’s strategy was brought to fruition with the aim to deter future misconduct and enforce in the community that punishment is inevitable through court action if any wrongdoing is found. Understandably, AMP crumbled under the mounting pressure with ASIC’s growing power and funds available made possible by the further $400 million funding from Government.

ASIC views AMP’s confession to its historical faults as a victory for the ‘why not litigate’’ strategy operating under their fairness imperative. ASIC is hoping that the honest actions shown by AMP today will become a part of the norm within the industry. The clear cut benefits of admitting to misconduct before being caught is the main consideration coming into effect. ASIC’s litigation strategy has evidently lead to stronger cooperation by AMP.

By Nick Psaltis

Click here for a 7 days access to our Lotus Blue Portal.

KOSEC does not take into account the investment objectives, financial situation and advisory needs of any particular person, nor does the information provided constitute investment advice. Under no circumstances should investments be based solely on the information provided. KOSEC is intended to provide general information only. Please be aware that investing involves the risk of capital loss. This message is confidential and may be privileged. It is intended only for the use of the addressee named above. If you are not the intended recipient, any unauthorised dissemination, distribution or copying is illegal. We do not guarantee the security or completeness of information hereby transmitted and are not liable in either respect or in respect of any delay. Nothing in this message is intended as an offer or solicitation for the purchase or sale of any financial instrument. Any market prices or data, unless specifically verified and identified as such, are not warranted as to completeness or accuracy. Kodari Securities Pty Ltd (KOSEC) is a Corporate Authorised Representative (No. 399 556) of Longhou Capital Markets (AFSL No. 292464) which is regulated by the Australian Securities and Investment Commission (ASIC). KOSEC wishes to disclose that KOSEC and its staff may hold stock they recommend in their own portfolios and that any decision to purchase recommended stock should be done so after the purchaser has made their own inquires as to the suitability to their own requirements. Click here to view our FSG.

KOSEC Terms & Conditions

Kodari Securities Pty Ltd (CAR 399556) trading as KOSEC is regulated by the Australian Securities and Investment Commission (ASIC). KOSEC is a financial services company and any information provided by its platforms, portals, reports and documents is protected by copyright. Any unauthorised production of this information is prohibited.
KOSEC reserves the right to change or remove any information provided on our website, reports or any documents including these terms and conditions at any time without notice. The change or modification to the terms and conditions will be effective immediately upon posting an updated version on our website, necessary platforms and documents. It is recommended that you review the information provided on our website, including these terms and conditions frequently for any changes.

Disclaimer
KOSEC provides general advice only. The information provided is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. KOSEC recommends that you obtain your own independent professional advice before making any decision in relation to your particular requirements or circumstances. Please make sure you read our Financial Services Guide (FSG).

KOSEC does not guarantee any returns. Past performance of any product discussed is not indicative of future performance. (We urge that caution should be exercised in assessing past performance. All financial products are subject to market forces and unpredictable events that may adversely affect their future performance). Investing in the stock market can incur huge losses. Please also be aware that fees will incur on every transaction regardless of the performance of your investments or returns generated. Employees and or associates of KOSEC may hold one or more of the stocks, securities or investments reviewed by the company.

Your use of information from our website, reports, documents and from talking to our representatives/associates is at your risk. Under no circumstance should the investment be based solely on KOSEC information and general advice. You should seek professional financial planning advice.
KOSEC aims to maintain the accuracy of the data and information provided on this website, by using information prepared from a wide variety of sources, which KOSEC to the best of its knowledge and belief, considers accurate and does not make any representations or warranties of any kind, expressed or implied, about the completeness, accuracy, reliability, suitability or availability of the information provided.

We may at times refer to third parties, which the details of these third parties have been provided solely for you to obtain further information about other relevant products and entities in the market. KOSEC has no control over the information third parties have, or the products or services offered, and therefore make no representations regarding the accuracy or suitability of such information, products or services. You are advised to make your own enquiries in relation to third parties. Our inclusion of any third party content is not an endorsement of that content or the third party.

Fees
As a client you will be charged a yearly service fee and a set brokerage fee per transaction. Your service fee will automatically renew at the end of your agreed 12 month period at the same rate advertised at the time. Your credit card or bank account will be charged for a further year following which will again auto renew until you cancel your yearly service fee. You can cancel the auto renewal at any time in advance of the renewal date by contacting us. KOSEC is aware of the need to ensure the security of your credit card details and our payment systems are compliant with the Payment Card Industry (PCI) Data Security Standard.

Privacy
You consent to receiving email correspondence from KOSEC, as well as companies KOSEC has an association with. These emails will be sent by KOSEC and third party companies. You can opt out of receiving any category of emails at any time by contacting us. We may from time to time inform you of special offers, or even ask your opinion of the services we provide, but your involvement is optional. Should you request us to do so, we will archive your details.

Indemnity and Liability
You indemnify KOSEC from all claims or threatened claims, suits, demands, damages, costs as well as including legal costs incurred in dealing with any threatened claim, expenses made by any person or corporation against KOSEC and any other amounts which is caused by KOSEC providing information, execution and General Advice.

You hold KOSEC harmless and release it from any liability in respect of any loss, harm or damage arising from a decision made by you on the basis of information obtained through the use of our portal, reports, documents or any General Advice given and any transaction taken place.

You hold KOSEC harmless and release it from any liability in respect of any loss, harm or damage arising from delays in executing orders for the client and acknowledges KOSEC makes no guarantees about the time taken to execute an order on behalf of the client. You acknowledge that KOSEC relies on third parties in providing technology and release KOSEC from any harm, loss or damage you may suffer as a result of the failure of such information technology.

Cookies and Links
KOSEC website, and its portal uses cookies, which lets us identify your browser while you are using the site or our portal. Cookies do not identify you personally. They simply allow us to track your usage patterns. If you prefer not to receive cookies, you can configure your browser to reject them or to notify you when they are being used. The functionality of the KOSEC website may be impacted if you restrict the use of cookies.

Fill up the form below and we will get back to you as soon as possible.

CLAIM YOUR FREE E-BOOK &
7 DAY ACCESS TO LOTUS BLUE

STOCK MARKET SUCCESS

KOSEC’s CEO, Michael Kodari’s new book, “Stock Market Success” valued at $39.95, available at Dymocks book stores with all the proceeds going to Dymocks Children’s Charities.

CLAIM YOUR FREE E-BOOK WHEN YOU LOGIN TO LOTUS BLUE INVESTMENT PORTAL

Latest TV Commercial