SYDNEY (Reuters) - Australia’s largest-listed wealth manager, AMP Ltd (AMP.AX), told an inquiry on Tuesday it expected to spend A$1.18 billion (666.92 million pounds/$852.60 million) to compensate customers who had received bad advice or been charged for no service.
AMP interim Chief Executive Michael Wilkins told the powerful Royal Commission inquiry into financial-sector misconduct the discrepancy with the A$290 million it had previously put aside for refunds was due to accounting rules.
The firm has been rocked by revelations of widespread misconduct including charging customers without providing a service and conspiring at board level to deceive a regulator about the practice.
Former director Wilkins replaced the previous CEO and chairman after the inquiry revealed their alleged involvement in misleading regulators.
He said there was a risk that an extensive review of over 217,000 customer files could find further problems.
In July AMP told investors it had put A$290 million aside to compensate customers for poor advice and expected to spend A$50 million in each of the next three years on a review of fees and advice across its network of financial advisors, the country’s largest.
Asked by a lawyer assisting the inquiry whether AMP faced the risk of finding further cases of fees-for-no-service, Wilkins replied “yes”.
The Sydney-based firm has already lost over half of its market value since the inquiry began in February, hit by an exodus of customers abandoning and fears that reforms ensuing from the inquiry could threaten its business model, such as forcing the separation of its advice and product manufacturing units.
The inquiry’s final report due in February 2019 is expected to recommend tougher regulation and potential prosecutions.
National Australia Bank Ltd (NAB.AX) Chairman Ken Henry earlier on Tuesday told the inquiry he regretted his board’s failure to step in after the lender took three years to agree a refund for thousands of pension fund investors charged fees for advice they never received.
The inquiry continues its final week of public hearings with AMP’s Wilkins returning to the stand on Wednesday morning. He is expected to be followed with testimony from Shayne Elliott, the chief executive of Australia’s third-largest lender, Australia and New Zealand Banking Group (ANZ.AX).
Reporting by Paulina Duran; Editing by Stephen Coates