Into clear air

“There are some things that occur that one would argue are outside of one’s control,” says Michael Guggenheimer, chief executive of AMP Financial Planning (AMPFP). It’s a familiar feeling for many people involved in financial planning - the sensation that one’s own destiny is being determined by forces and interests outside the industry.

But Guggenheimer’s response is to treat the inevitable structural changes to the industry as an opportunity to position AMP’s flagship planning business as a leader - to set the agenda, rather than follow. It’s a response he’s pursued with some enthusiasm and not a little boldness. By July 1, 2010, all new clients of AMP Financial Planning will be dealt with on a fee-for-advice basis.

Product commissions will disappear. AMP will therefore re-engineer its product range so the embedded cost of advice is removed, and clients pay an explicit fee for the services provided by AMP’s planners. Transition period? AMP Financial Planning is in it now, Guggenheimer says.

It will not use the two-year period proposed by the Financial Planning Association of Australia (FPA) to reform its planners’ remuneration; nor will it take advantage of any transition periods granted by the various industry reviews and inquiries currently underway. Guggenheimer says he expects AMPFP to emerge into “clear air” in July next year.

It has the potential to steal a considerable march on its competitors - particularly those that intend, or have to, avail themselves of the full two-year transition period.

But this highly-visible move is only one part of a much larger transition program that has also involved the largest ever single roll-out of the Coin financial planning and practice management software ever undertaken, designed to improve the efficiency and profitability of its planning practices, and an overhaul of its internal research capabilities, supported by outside expertise from van Eyk, Lonsec and Chant West.

“There’s a number of public inquiries, a number of government-initiated reviews that are underway, whether it be Ripoll, whether it be Henry or whether it be the Cooper review, all of which have got potential opportunities, potential impacts on the way in which participants in the marketplace operate,” Guggenheimer says.

“Whilst Ripoll is looking more at the role of the financial planner, Henry is looking at the tax system and Cooper is looking at the governance and support and structures; we see that all of them have [an effect] in terms of considering what we do in the future, and therefore we see it’s important that we spend time thinking about the implications of it, and making sure that our views are shared in the formal sense of submissions to the inquiries and making our views known generally to the stakeholders.”

Guggenheimer says the exact conclusions, recommendations and results of the reviews obviously can’t be known until they’re known. Even so, it’s clear the industry must move in a certain direction. “We’ve had an industry body response through IFSA and FPA. They have consulted and contemplated what the world should look like, from an industry perspective, and put forward their discussion papers and charters and the like - which we support.

“FPA and IFSA both have contemplated an adoption from the 1st of July, 2010, with a transition period of two years thereafter. We believe there’s an opportunity to get ourselves ready now, and to be ready in the new world from 1st of July, 2010, and therefore accept that the transition will occur between now and then, and not afterwards.

“There are a couple of reasons why we’ve taken that view. We treat seriously the agenda of change. We believe we’re well placed in terms of that change agenda. “What we’ve got to do is set ourselves to do that with all new clients from the 1st of July next year.

Between now and then we’ve got a program where we’re working with all of our practices to get them, if you like, what I’d refer to as ‘ready and able’. “We will need to do some systems work. If you think about being ready for one-seven, there’s a number of product admin systems which the group will have to consider - how do you reconstruct products without the embedded cost of [advice] being part of it?