Hodge: "What do you think it says about the cultural norms of financial advisers that that does not seem to have, not only not universally been the case, but to such a significant extent not been the case?
Wilkins: "I think that the financial advice industry is improving. I think where it was coming from was a transaction-by-transaction type arrangement where commissions, including trail commissions, continued, and there was, in the case of that environment, no expectation that services would be delivered for those trail commissions.
Hodge: "If we sort of cut to the heart of it, until the switch to fees for service, financial advisers were, effectively, a distribution network or channel for wealth products and insurance products?"
Hodge: "And they were paid commissions by the manufacturers of the wealth products or the insurance products in order to distribute the products to consumers?"
Hodge: "And they were paid trail commissions, ordinarily as part of that?"
Hodge: "And they did not need to provide a service to the consumer in exchange for the trail commission?"
Wilkins: "The commission was being paid by the product manufacturer. That's right. It was a payment by the product manufacturer. "
Hodge: "It did not require them to provide any service to the consumer?"
So, people who work in the financial advice industry are so uneducated they do not understand basic norms.
I guess we already knew that.
Hodge: "Do you wonder, though, why it is that you would need to tell your advisers that if they're charging a fee for a service, they have to provide the service?
Wilkins: "It would be a normal expectation that people would understand that."
Hodge: "Outside of financial advisers, it's hard to think of any profession or group of people that think if they charge money for a service, it's okay not to provide the service?"
Wilkins: "You would think that where a fee has been agreed, the service would be delivered."
Hodge: "That's certainly what most professions are used to?"
AMP advisers did not realise they could not charge for services that were not provided – boss
AMP's advisers lacked the education to realise that they could not charge fees for services they did not provide
Hodge has pointed out that AMP tried to "get the jump" on the Future of Financial Advice laws – which were introduced in 2012 – by getting rid of commissions and switching to fees-for-service in mid-2010.
Hodge says he finds it odd that, given AMP was clearly on top of the laws, that it took another five years for AMP's advisers to realise that they needed to provide services in exchange for the fees.
Wilkins: "I think that a number of them did understand that, but also a number did not, and as the educational standards have improved, as the policies and procedures that AMP has put in place have tightened up, we've seen an improvement in that. "
(What level of education do you need before you know that you can not charge fees for services you do not provide?)
At any rate, AMP and ASIC have yet to agree on some final policy issues about the remediation program, so AMP is still remediating customers according to its original approach, which will take nine years to remediate everyone, rather than three years.
Hodge: "Do you regard that as a satisfactory situation?
Wilkins: "I would like to finalise the agreement with ASIC."
Hodge: "What was the reason that AMP had initially sought to exclude them?"
Wilkins: "We believe that at less than $ 500 in terms of the total fee, that it was more likely to be general advice rather than personal advice, and could be excluded from the process."
AMP tried to exclude some customers from remediation
Despite realising how poorly it has treated customers, with its go-slow approach to remediation, AMP has still been trying this year to exclude some customers from the program.
As at September, AMP was trying to exclude customers who paid under $ 500 per annum for financial advice from the review and remediation program.
The total amount of fees relating to those contracts, from the period 1 July 2008 to 31 December 2017, was $ 158m, Affecting about 271,000 customers.
However, Asic said those customers should not be excluded.
AMP has now agreed to include those customers.
I guess that means the customers who would've had to wait 17 years to be remediated will now only have to wait 13 years?
So, a "fix and rebuild team" was created in May 2018, and AMP committed to ASIC that customers would be remediated within three years.
AMP expects to be able to complete the remediation within three years of 1 July 2018.
It has 150 staff working on remediation, and the revised total estimate of the cost of the program is now $ 778 million.
That includes the cost of carrying out the program within three years.
Therefore, in June this year, the board was told that AMP required a significant reset of its review and remediation program.
(I wonder how much that advice cost?)
Hodge is asking Wilkins about the inordinately-slow time it's taking for AMP to remediate customers.
Part of the problem, from AMP's perspective, is that it's incredibly difficult to track down all the customers who have been charged fees for no service.
AMP's systems are too poor.
It leads to this incredible fact.
Since AMP has been taking so long to get its act together, AMP realised there could be some customers who might have been charged fees but not had services provided at the beginning of 2008 facing the prospect that it could take up to 17 years after they had been charged those fees for them to be remediated.