AMP annexes Cavendish as SMSF battle looms

The price of its latest headline acquisition has not been disclosed and some of the numbers don’t immediately add up but AMP is upbeat on its new SMSF business unit.

AMP this week purchased Adelaide-based self-managed superannuation fund administrator, The Cavendish Group, and will set about integrating the company with its existing SMSF businesses, Multiport, Ascend and SuperIQ, which is 49-per-cent-owned by AMP.

While AMP was keen to spruik its new acquisition, growing SMSF business and position as “the most significant player in the SMSF professional administration market”, some in the industry have privately questioned the deal.

With about 5000 funds and 110 employees, Cavendish is the largest SMSF administrator in an extremely fragmented market.

As one industry source told Professional Planner, if this equates to 90 fund administrators and 55 funds per administrator, it is well below the 150 – 200 funds per administrator that is the benchmark for some competitors.

Does this mean AMP will target a three-fold increase to ensure Cavendish retains it place as a market leader in the largest and fastest growing superannuation sector in Australia?

Or will it look to reduce head count as the Adelaide-based business is drawn into AMP’s existing SMSF businesses?

AMPing up the scale

Head of the new AMP SMSF business unit, Paul Sainsbury (right), would not be drawn on specific targets or time frames but pointed out that each SMSF business is different, with technology and outsourcing making funds-per-administrator comparisons difficult.

Sainsbury will take up the role of director AMP SMSF on July 2 – this will be in addition to his role as director integration – and he will report directly to AMP chief executive Craig Dunn.

Dunn said being a leader in the SMSF market was a key strategic priority for the company.

“We have established a new business unit with the remit to quickly take a leadership position in the highly fragmented SMSF market,” he says.

“We will develop customer-friendly and good-value SMSF offers, leverage our existing distribution channels through our aligned adviser networks and also increasingly through accountants, stockbrokers, external financial advisers and customers direct as we increase our scale in this sector.”

While AMP SMSF initially plans to focus on building scale to deliver SMSF administration services to individuals, accountants, stockbrokers and external financial advisers, and developing SMSF advice and packaged solutions for AMP’s aligned distribution channels, it will not be an easy sell.

SMSF-focused accounting firms typically administrate 50 to 300 SMSFs and are likely to guard their territory and – particularly those firms that offer financial planning – increase this side of their businesses.

However, Sainsbury believes that AMP’s SMSF assets together with Cavendish will create an irresistible new force in the SMSF market.

“The acquisition of Cavendish, combined with the client base of our existing SMSF businesses, Multiport, Ascend and AMP’s investment in SuperIQ, will make us the most significant player in the SMSF professional administration market,” he says.

“It also puts us in a strong position to take advantage of the increasing move by SMSFs to seek advice from financial planners. While only 14 per cent of existing SMSFs use a financial adviser, 42 per cent of SMSFs are being established by financial advisers for their clients.”

AMP’s SMSF administration and platform offerings, which will be available through Multiport, Cavendish and SuperIQ, will target individuals, accountants, trustees and external financial advisers post the Cavendish acquisition.

The group’s SMSF advice and packaged solutions will start to be rolled out across AMP’s aligned financial planning network from July through Ascend, which will include a branded version of SuperIQ.

AMP SMSF Advice, which provides advice services to accountants as a licensee, will remain in AMP’s Financial Advice Network division.

While Sainsbury would not reveal what AMP paid for Cavendish, saying only that the acquisition price is not material and will be funded from existing AMP resources, he confirmed that the deal is expected to be completed in early July subject to a number of conditions.

What is Cavendish?

Cavendish consists of three operating entities – SMSF Administration, Investment Portfolio Administration and Actuarial Services – with AMP acquiring the first two and the latter not part of the deal.

Cavendish joint managing director, Andrew Hamilton, will take on a new role as AMP SMSF’s administration director, reporting to Sainsbury with responsibility for the Multiport and Cavendish businesses.

Hamilton is also chairman of SMSF Professionals’ Association of Australia Limited (SPAA).

Cavendish’s other joint managing director, Andrew Row, will consult to AMP SMSF in addition to managing the Cavendish Actuarial Services business.