AMP ‘doubles down’ on troubled wealth core

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Net profit after tax in the Australian wealth management unit plummeted 44 per cent to $110 million, while assets under management fell 8 per cent to $124.1 billion.

The division continued to be plagued by a loss of customer accounts as corporate and individual clients ripped up mandates, withdrew funds or took their business elsewhere.

Mr Georgeson said the wealth management earnings had also been “negatively impacted” by the shrinking financial adviser network, although added it was a “small” contributor.

Adviser numbers declined by 26 per cent over the year, to 1,573 representatives, which Mr De Ferrari said the bulk of which could be attributed to AMP’s own choice to force advisers and firms deemed “unsustainable” to exit the network.

The company is battling a class action lawsuit against exiting firms seeking damages for losses sustained by AMP resetting the terms of its longstanding and controversial “buyer of last resort” policy.

Asked by Citi analyst Nigel Pittaway whether AMP expects the financial advice operations to become profitable in 2021, Mr Georgeson clarified a turnaround would more likely come in the “back end of 2022 [or early] 2023”.

Mr De Ferrari said he believes AMP can extract “good money” out of high quality advice firms in which it has equity stakes, but that extracting margins from the tradititonal AMP model of licensing third-party financial planning firms was “really hard”.

AMP will invest in “phone-based” and digital financial advice in its bid to develop offers for the mass market and reduce “wealth inequality”, Mr De Ferrari said. Though he added that the regulations surrounding limited and tech-enabled advice was a “work in progress”.

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ASIC is in the process of consulting with industry and consumer groups over methods to aid the delivery of cost-effective advice.

‘Stay on our toes’

Total assets under management across its wealth platforms came in at $63.2 billion, almost $3 billion lower than in 2019.

Even the North platform, which Mr De Ferrari described as an “under-appreciated” asset for the company, saw cash flows decline by 6 per cent over the period.

In shareholder documents, AMP blamed the decline in its favoured platform to a “slowdown in activity during COVID-19”.

However, rival platforms including Netwealth, Hub24 and Westpac’s Panorama have each surged during the pandemic as financial advisers switched to new technology amid the lockdowns.

“There are new tech entrants that are effectively doing very well and capturing a large share of the net inflows across the more extablished competition,” Mr De Ferrari told The Australian Financial Review.

“That is something where we need to stay on our toes. The big thing we have done is try to set up an independent team that is end-to-end so we can effectively compete. Obviously we still have some work to do.”

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He said AMP was “doubling down” on its strategy to grow the North platform and pointed to its increasing its assets under management by $4 billion notwithstanding the cash flow decline.

“We will have very little attrition of volume from North if we have the best in class platform in the market,” Mr De Ferrari said.

About 330 external financial advisers joined the North platform in 2020, indicating a 30 per cent increase. However, about half of those are ex-AMP advisers leaving the network.

Looking forward, AMP gave guidance that asset-based revenue in the superannuation business would fall by another 70 basis points by 2022 due to cuts in administration fees as the sector comes under political pressure to cut costs to members.

New “investment structures and menus” in super are expected to drag on asset-based revenue but also help reduce investment management expenses.

The guidance followed a decision to move the New Zealand wealth management operations to a “predominantly” index-based investment approach in a bid to cut costs.

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