AMP class action damages could exceed $100m, analysts suggest

afr.com:

AMP could be on the hook for north of $100 million in damages after itlost a class action over its controversial financial adviser payout proposal, with the market expecting the issue could lower capital returns for years.

Shares in the financial services outfit closed down 4.7 per cent at $1.02 on Thursday, after a drop of more than 6 per cent on Wednesday. That brings the total fall in the company’s market capitalisation since the Federal Court decision to about $338 million.

AMP will pay more than $900,000 to two financial advice outfits, and may be on the hook for more. Ken Irwin

In the case, Federal Court judge Mark Moshinsky ruled that AMP would have to pay exiting financial planners almost double what it had proposed as its2019 changes to a scheme known as Buyer of Last Resort were invalid.

Under the changes, AMP had cut payments to financial planners operating under the AMP brand for their client books at 2.5 times the value of ongoing revenue instead of the previous rate of four times.

AMP was ordered to pay $929,000 in damages to the lead and sample plaintiffs on Wednesday, but the final damages bill is still unclear as thenumber of advisers who used the scheme and the value of their businesses is unknown.

AMP is yet to confirm whether it plans to appeal the decision. But analysts suggest based on the judgment that damages could soar past $100 million and pose material concerns for the company based on estimations that between 135 and 150 advisers could be covered by the class action.

“If we take that 135 and multiply it by that $800,000 [awarded to lead plaintiff Equity Financial Planners], we’re talking about a very material amount of about $100, $105 million,” Morningstar analyst Shaun Ler said.

He qualified