AMP was under the microscope of the royal commission on Tuesday as the Kenneth Hayne, QC, led inquiry turned its focus to misconduct in the scandal-prone financial planning sector.
Counsel assisting the commission Michael Hodge, QC, homed in on AMP’s practice of ring fencing, in which "orphaned" clients of planners who had retired were put into a single pool where they were still being charged fees for up to 90 days for services they did not receive.
AMP hired Clayton Utz to conduct an independent investigation into the issue to soothe the concerns of the Australian Securities and Investments Commission, however the royal commission heard repeated evidence of intervention in the formulation of the report from senior management within AMP.
Mr Hodge told the hearing that Clayton Utz provided 25 drafts of the report to AMP which resulted in detailed changes being made, including the removal of Mr Meller's name from an earlier version of the report. Mr Hodge said Mr Meller's was the only name removed. An internal document showed this was in part because another executive did not want to draw the attention of ASIC, the royal commission heard.
Mr Meller’s name was later put back into the report along with a line exonerating him.
Commissioner Hayne told the hearing there may be "questions" about "the extent to which senior management or others associated with AMP, sought to influence or did influence, the content of the report by Clatyon Utz apparently submitted to ASIC as an independent report."
A professor of corporate law at Melbourne University, Ian Ramsay, said he was also shocked by this week’s revelations at the Royal Commission.
“I have been someone who has closely watched the industry for many years and has advised various bodies. I have been really shocked at what’s come out," he said.
“I must confess I hadn’t really appreciated the extent to which, at some major financial institutions, there has been conscious and deliberate contraventions of the law, including deliberately ignoring of legal advice.”
Dr Ramsay recently chaired an independent advisory panel for the Turnbull government on dispute resolution in the banking sector.
At the end of the day, the strongest enforcement message is to do something more than just banning people.Professor Ian Ramsay
“There has been this growing evidence of ongoing problems in the financial advice sector and the royal commission is putting a spotlight on it in a way that hasn’t actually happened before.”
Dr Ramsay said ASIC needed access to stiffer penalties and needed to apply them more readily, rather than just relying on banning financial advisers, which it does in most cases.
“At the end of the day, the strongest enforcement message is to do something more than just banning people.”
During his second day giving evidence, AMP group executive advice and New Zealand Anthony “Jack” Regan lost count of how many times the wealth manager had misled ASIC during its fees for no service investigation. He said he would have to agree with counsel assisting Michael Hodge’s count of 20 times.
Mr Regan, who took up the position in early 2017 and has cleaned up the division, said the wealth manager’s conduct was unacceptable.
“It’s clear that we preferenced shareholders in that exchange at the expense of customers,” he said.
The chair of the Abbott government’s financial system inquiry and former Commonwealth Bank boss, David Murray, would not comment directly on the AMP revelations but said there remained “work to do” to reform the financial planning industry.
“There’s undoubtedly some very good ones. But if it’s going to operate like a profession...then there’s a long, long way to go," he said.
Mr Murray said consumers of financial advice suffered from a fundamental "information asymmetry" when it came to financial advice and more work was needed to lift trust levels.
“They should be able to expect that anybody putting their shingle up as an advisor should be able to be trusted to act in the interests of their client," he said.