AMP will settle a class action lodged by its financial advisers for $100 million after the Federal Court ruled against the business in July, and the two sides agreed to engage in mediation. 

The listed financial services group had previously announced in September it filed a notice of appeal, intending to challenge the court ruling in relation to changes it had made to acquire the advisers’ practices. 

AMP says in a reaching a settlement, the business makes no admission of liability. The settlement covers the class action in its entirety, including where there has been no judgment, and is subject to the finalisation and execution of a deed of settlement and approval by the Federal Court. 

“This is an important step forward for our Advice business and for AMP more broadly, as it allows us to put this legacy matter behind us, which has impacted relationships with our valued advisers,” CEO Alexis George said. 

“We’ve worked very hard in recent years on rebuilding the relationship with advisers and we’re looking forward to working with them in the delivery of quality financial advice, at a time when Australians need it more than ever.” 

The advisers in the class action had alleged changes made by AMP in buying their advisory practices led to them getting less money from the sale and Justice Mark Moshinsky ruled in their favour. 

In his ruling Justice Moshinsky said the changes made to the Buyer of Last Resort (BOLR) exit program on August 8 2019 were “ineffective” and “not authorised” under the scheme’s “legislation, economic or product (LEP)” provision. 

The BOLR policy formed part of the contractual relationship between AMP Financial Planning (AMPFP) and each financial planning practice in its network. 

It gave practices that wanted to leave the network the ability to sell back their register rights to the AMP subsidiary on 12 months’ notice or less in some cases.    

One of the changes in August 2019 meant the buyout was calculated on the basis of 2.5 times the value of ongoing revenue received by the practice in the prior 12-month period, instead of four times.  

Another change related to the multiple for grandfathered commission revenue. It reduced the multiple from an initial four times to 1.42 and cutting it by 0.8333 per month from September 1 2019 such that the multiple would be zero by January 1 2021, according to details in the ruling. 

Lead class action applicant Equity Financial Planners said the changes were not authorised by the LEP provision and that AMPFP “acted in breach of contract in putting forward BOLR valuations based on those changes”.  

Judge Moshinsky ruled Equity Financial Planners has suffered loss and damage as a result of the “breach of contract” and is entitled to damages in the sum of $813,560, subject to final adjustments.  

Wealthstone, a sample group member in the class action, is entitled to about $115,533 in damages, subject also to final adjustments. 

The Advisers Association CEO Neil Macdonald says the settlement “indicates to us that AMP wants to move forward from the past”.  

Equity Financial Planners relied on lay evidence from Mr Macdonald, who was at that time CEO and Company Secretary of ampfpa, an organisation representing financial planning practices in the AMPFP network. In February 2020 ampfpa changed its name to The Advisers Association.