Australian Ethical has announced it will completely divest from AMP following revelations of “systemic prudential and cultural issues” at the royal commission. They will not reinvest until AMP demonstrates they have addressed their underlying issues. And they are watching the two of the four major banks they have holdings in, in the light of the findings from the royal commission too.
Explaining the rationale behind Australian Ethical’s decision, the fund manager’s head of ethics research Dr Stuart Palmer pointed to “systemic prudential and cultural issues” revealed at the royal commission.
“There have been serious breaches of AMP’s duty to clients, including ‘fees for no service’, failure to reprimand dishonest advisers and remediate clients, and keeping clients in expensive, inappropriate, legacy products and platforms,” Dr Palmer said.
“AMP knowingly and deliberately misled regulators and there is sufficient evidence to show that these breaches are not isolated incidents.
“Senior AMP leaders consciously chose to prioritise AMP’s short-term profit at the expense of clients’ best interests and compliance with the law. Evidence revealed during the royal commission demonstrates that senior executives were involved in the misconduct, despite staff voicing concerns and knowledge that their actions were in breach of their licensee duties.
“The information released by AMP since the conclusion of the most recent royal commission hearings (including at its AGM today) doesn’t give Australian Ethical reason to change the above assessment of the evidence presented to the royal commission,” Dr Palmer said.
Ultimately, Dr Palmer said, AMP’s actions are in breach of Australian Ethical’s ethical charter – leading to the decision to divest.
I followed up this announcement with a couple of broader questions to Dr Palmer.
Q: The ethical behaviour of the other big banks are also shown to be found wanting in the RC – so is it likely that AE to do the same elsewhere, or is the fund not invested there?
Australian Ethical is underweight in the financial services sector due to its ethical charter. However, it is selectively invested in some financial services organisations, for example, we invest in two of the ‘big four’ Australian banks: Westpac and NAB, but not CBA and ANZ. We are closely monitoring the Royal Commission hearings and may revisit other investments depending on the evidence presented or findings of the Royal Commission.
Q: Is this a temporary or permanent decision, in that if AMP proved a change of behaviour, would the decision be reversed?
AMP, both before and after the most recent Royal Commission hearings, has taken significant steps to begin to remedy past wrongs and to safeguard against their recurrence. We hope that this and the further action planned by AMP will be effective over time to entrench a robust ethical culture right across the organisation. But we will remain divested until we are satisfied that this work has been fully and successfully implemented.
