AMP has started compensating customers for investment losses after it provided advisers with incorrect information about the risk profile of certain products in another blow for the troubled wealth giant.
Leaked documents obtained by The Age and The Sydney Morning Herald reveal AMP began sending letters to affected customers in March, notifying them of the blunder that dates back to late 2018.
At least sixteen products across AMP’s superannuation and investments portfolios were incorrectly labelled as “buy” when they should have been labelled “hold”, resulting in customers unknowingly pouring money into risky or underperforming funds.
The incorrect ratings were published by AMP on the COIN digital platform that is used by its aligned advisers, meaning clients had received advice based on false information. The error occurred, according to company documents, after data was manually entered into the COIN system and not updated to reflect changed market conditions.
Letters were sent to clients after the compensation had been paid, starting in March, with AMP apologising for the “inconvenience caused” and pledging to improve internal processes to ensure the error was not repeated.
“We’re letting you know we’ve found some errors in the funds’ rating information provided by AMP to your adviser,” one sample letter uploaded to COIN said. “Your adviser wouldn’t have known this information was wrong and may have unintentionally provided advice based on it.”
The full extent of the problem has not yet been identified, but AMP has told advisers the incorrect ratings were published across all of its platforms, including North, iAccess and Summit, and remediation efforts would continue across the rest of the calendar year.
The size of each customers compensation has been determined by investment losses calculated by the performance of a similar fund over the same period. Customers were also paid an additional 6 per cent to make up for lost earnings.
“For any tax questions or how your Centrelink benefits may be affected by this compensation payment, please contact your tax professional,” AMP told affected clients.
AMP’s letter also informed clients they could make formal complaints to AMP’s client services or to the Australian Financial Complaints Authority.
“If you’re not satisfied with how we’ve resolved this issue, we’d really like to talk with you first. We can refer your complaint to AMP’s internal dispute resolution process,” it said.
AMP first became aware of the issue in late 2018 and is investigating the expected losses on a case-by-case basis.
AMP made the first tranche of compensation payments in March to clients using two platforms – AMP Personalised Portfolio Service and AMP Flexible Lifetime Investments divisions.
The company told advisers it would now conduct monthly audits to ensure all investment product ratings were correctly published on the COIN platform.
AMP advisers were charged a premium to access COIN’s various functions, including the ratings information, but one aligned adviser, who spoke on the condition of anonymity, said the technology was substandard.
“I used my own Van Eyk and Morningstar subscriptions,” he said. “I came to the theory that not everything AMP gives you is rosy.”
The former adviser said he paid around $50,000 per year in licence fees that were supposed to provide advisers with technology and compliance assurances.
“We’re all wondering – what did we get for that? The technology was crap and they promised us for 10 years that they’d improve but it’s just gotten more cumbersome as time drags on.”
It comes as AMP battles a class action brought by current and former advisers who claim they have suffered financially as a result of unfair changes to longstanding policies that determine the value of their businesses.
An AMP spokesman said half the remediation process was now complete. “After identifying the issue we notified the regulator and engaged with advisers, and we have since strengthened our processes to prevent this from reoccurring.”
Source: Thanks smh.com