In 2002, at the age of 38, Craig Dunn implemented a cost-cutting program that slashed $60 million from the cost base of AMP Limited in just 12 months, while at the same time steering the company through the introduction of the Financial Services Reform Act.
In 2006, he was forced to overhaul the way AMP’s financial planners gave advice after the company was slapped with an enforceable undertaking from the Australian Securities and Investments Commission (ASIC) for the widespread switching of clients out of their existing superannuation funds into more costly products operated by AMP.
The company was at a low point in its long history when the global financial crisis hit. Amid the economic downturn, Dunn miraculously got the slow-moving, often-backward giant ready for the new world under the Future of Financial Advice (FoFA) and Stronger Super reforms.
Now another Craig – Meller – faces the task of turning around AMP’s insurance business and realising Dunn’s vision of AMP as a standout leader in the self-managed superannuation market. Insurance represents around 28 per cent of AMP earnings.
Meller, appointed chief executive officer of AMP last week, suggests the answer to addressing AMP’s flagging insurance fortunes could be in encouraging financial planners to accept level commissions instead of taking hefty upfront payments.
In turn, customers would pay level premiums, which stay the same year on year rather than stepped premiums.
The UK, where Meller hails from, is a level-premium market.
“With stepped premiums, as you get older, cover gets more expensive so when people get to their 50s, they start to rethink: ‘Am I getting value for money?’ There’s a strong case for level premiums and our job is to get clients thinking long term and take level premiums which will be better for the industry.”
SMSF strategy
AMP is also banking on the burgeoning $500 million SMSF market to be a major growth driver going forward.
Under Paul Sainsbury, Dunn spearheaded the creation of AMP SMSF, which provides a range of administration services to SMSF trustees.
AMP SMSF is an experiment for the mother company, which has traditionally sold its insurance, investment and superannuation products through financial advisers. Now it is targeting investors directly with expensive print, television and digital marketing campaigns.
Part of AMP’s strategy is to cross-sell its higher margin investment and banking products to SMSF trustees.
“Our approach is to gain a foothold in administration and then on top of that have a conversation with trustees about providing them with other services, such as lending them money to buy property in their funds,” Meller said.
