AMP scandal a $1bn hit

Shares plummet on back of advice rip-off

AMP has had $1 billion wiped off its market value during a royal commission appearance in which the wealth-management giant admitted charging clients for advice they never received and then lying about it to the corporate watchdog.

AMP shares continued their descent yesterday as the 169-year-old firm apologised “unreservedly” for its conduct. Shares have shed 6.9 per cent of their value since Monday to hit a 17-month low of $4.45.

The company faces possible criminal charges, with ASIC yesterday saying it is continuing to investigate AMP’s conduct in relation to fees for no service.

“Making false or misleading statements to ASIC can result in civil and criminal sanctions,” the watchdog said.

The royal commission has heard AMP deliberately and unlawfully continued charging fees to “orphan” clients for three months despite them not receiving advice services.

AMP group executive for advice Jack Regan admitted that one letter to ASIC claimed clients were at fault for being charged ongoing fees, when in some cases it was the result of a conscious effort by AMP. The company presented an independent report to ASIC last year as a follow-up to the activity, but only after it went through 25 draft versions and a series of changes from senior executives and the board.

AMP yesterday issued a statement apologising “unreservedly” to customers, the regulator and the community.

“AMP is deeply disappointed that its advice business has charged customers fees where service has not been provided and for misleading the regulator in this regard,” the company said.

University of Sydney Associate Professor in marketing, Margaret Matanda, said AMP’s brand had been badly tarnished.

“This is going to be extremely damaging to AMP’s reputation and their brand image,” Ms Matanda said. “We thought this was an iconic brand … but now we are having these doubts about its brand image and are seeing that it is not a very ethical brand.”

AMP and the nation’s big four banks have paid almost $219 million in compensation to more than 310,000 financial advice customers charged fees for no service.