AMP is appealing against a Federal Court ruling in a class action lodged by its authorised financial advisers in relation to changes the listed financial services provider had made to its buyout program. 

The advisers alleged the changes led to them getting less money from the sale of their practices to AMP Financial Planning (AMPFP) and Justice Mark Moshinsky ruled in their favour in July. 

“AMPFP confirms that it has filed a Notice of Appeal in relation to the judgment,” AMP said in a statement. 

“The parties have also agreed to engage in mediation, which will take place in November 2023.” 

Justice Moshinsky in his ruling 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 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 applicant Equity Financial Planners contends that 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 (TAA) says it is disappointed that AMP has decided to appeal the ruling. TAA CEO Neil Macdonald says the court made a “conclusive judgment” and that Justice Moshinsky “already took all the matters raised by AMP into consideration”.  

However, he welcomes the planned mediation in November, saying it in the interests of all involved that the matter should be resolved as quickly as possible. 

“It has already been a lengthy, expensive, and stressful process for all our impacted members,” he said. 

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. 

Click here for the court ruling.