Despite the Federal Court greenlighting the AMP Buyer of Last Resort (BOLR) lawsuit settlement amount, there is still a long way to go before financial advisers can have peace of mind. The payout process could potentially draw out to mid-2025.
This is according to The Advisers Association (TAA) chief executive Neil Macdonald, who said that advisers can still lodge an appeal of Justice McElwaine greenlighting the total settlement amount on September 6. Justice McElwaine approved litigation funder Augusta Pool's payout of more than $42 million, along with solicitors Corrs Chambers Westgarth's share of about $1.8 million.
Group members have 28 days to lodge an appeal from the settlement date. Once the 28 days are over, an independent company starts doing the calculations and so on for each firm, which includes group A and group B of the class action.
The Calculation Process
The calculations, which apply various discounts, are finalized, and a notification is sent out to each firm stating the amount they are entitled to. Macdonald pointed out that member firms have a right to dispute this at a cost of about $10,000, which an independent barrister then reviews.
Potential Disputes and Appeals
A group member can appeal once they get their notification. They can actually complain and say, 'I don't think that discount is appropriate for me or different to me.' Once that is all agreed upon and there are no further disputes, the payments will be made. Macdonald expects that the entire process will finalize either in March or June of next year.
The Impact on Advisers
Some 475 group members took part in the class action. Ninety-two or 20% of the participants opposed the approval of the settlement. Before approving the sum, Justice McElwaine listened to every individual who objected and said many 'were quite distressed in explaining their deeply personal reasons for opposing the settlement.'
One group member told the judge that that $100 million settlement was not sufficient and doesn't represent fair compensation for damages incurred by the collective participants in the class action.
'No doubt the court will be aware the suggested legal and funder costs are approx. $42 million and will likely exceed $50 million by the time this matter is finally resolved,' court documents show. 'Based on the number of potential group members this results in the compensation to be approx. $100,000, however the reality is this figure is significantly reduced based on the proposed settlement distribution scheme. Personally, my BOLR shortfall is approximately $1.6 million (excluding GST) [and] I do not believe the prospect of settling for less than $100,000 is a fair or reasonable result.'
AMP's Devaluation of AMP Financial Planning Practices
In July 2023, the Federal Court determined that AMP's devaluation of AMP Financial Planning (AMPFP) practices from 4x to 2.5x recurring revenue was 'unconscionable.' AMP also changed the multiple for grandfathered commission revenue initially from 4x to 1.42x. From 1 September 2019, this reduced by 0.8333 per month. On 1 January 2021, the multiple was worth zero.
The Challenges Ahead
Looking at it from a practical point of view, Macdonald said that some of the objectives to appeal would need to obtain funding. 'I think that would be very difficult now. A couple of individuals are taking their own action anyway,' he said. 'Because there's a mediated outcome, and the judge has approved that outcome, it's unlikely that current litigation funders will continue to fund it, especially considering some of their fees have been knocked back as part of resettlement.'
The lengthy payout process, the potential for appeals, and the financial hurdles involved in challenging the settlement highlight the complexities and uncertainties that remain for financial advisers affected by the AMP BOLR lawsuit. While the settlement offers a path to resolution, the road ahead is likely to be long and arduous for those seeking full compensation for the damages they incurred.
