Financial services group AMP (ASX: AMP) has agreed to pay $100 million to settle a class action brought by financial advisers who had their exit payments dramatically cut by the company in 2019.
The payout follows a Federal Court ruling in July that found in favour of the financial advisers, including lead applicant Equity Financial Planners which claimed losses of $813,560 from AMP’s actions.
AMP landed in hot water in 2019 after making a strategic move to cull the scale of its financial advisor network.
Through its AMP Financial Planning (AMPFP) arm, AMP cut payments to financial planners that it had sought to shed from its network to 2.5 times the value of their ongoing revenue from four times previously.
The class action alleged that this change made by AMPFP to its Buyer of Last Resort (BOLR) policy was invalid.
While AMP made a provision of $50 million in its FY23 first-half results following the Federal Court ruling on 5 July 2023, news of the $100 million settlement has led to an immediate impact on AMP shares which rose almost 9 per cent to a high of 82.5c in early trading.
AMP, which says it makes no admission of liability following its agreed settlement, notes that sum announced today ‘covers the class action in its entirety, including where there has been no judgment’.
The settlement remains subject to the 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,” says Alexis George, AMP’s chief executive.
“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.”
Uncertainty over the extent of the financial settlement has dogged AMP since the class action was first brought against the company in July 2020.
The settlement was reached through a mediation process after a rumoured appeal by AMP against the July Federal Court decision failed to materialise.
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