The bulk of AMP’s network of around 3,800 financial planners will welcome its move to mandate minimum standards of education, according to Rob Caprioli, AMP group executive of advice and banking.
Under the program, all existing and new advisers must be designated as either a Certified Financial Planner (CFP) or Fellow Chartered Financial Practitioner (FChFP), or hold a masters degree in Financial Planning. The Financial Planning Association of Australia (FPA) is the Australian certification body for the global CFP designation, while the Association of Financial Advisers (AFA) oversees the FChFP standard.
“We’ve engaged…with all our adviser representatives from all our licencees on this change, and the feedback has been very positive…even though it’s early days,” Caprioli told reporters during a press conference at AMP’s headquarters on Friday morning.
Adviser numbers won’t suffer
Asked whether he expected any attrition among its financial planners and those from aligned practices as a result of the new standards, Caprioli said: “You will find that some may leave, but also we find that some may join.”
“For those that choose to leave or to bring forward their early retirement, we have mechanisms in place for succession planning, and particularly through our Horizons academy, to actually bring on and recruit new advisers into the industry…so we feel comfortable we’ll be able to manage that,” he said.
The changes will affect advisers across its in-house AMP Financial Planning operation, along with aligned Australian Financial Services (AFS) licensees Charter Financial Planning, Genesys Wealth Advisers, Hillross, Horizons, ipac and smsf advice. These comprise a total of around 1500 practices.
Caprioli suggested that some 1260 of the group’s advisers already comply.
“Around a third of our planners across all of our licensees are registered as CFP and/or the equivalent,” he said.
New advisers must meet the above criteria within five years of joining an AMP licensee, while existing advisers must comply by the end of 2019.
Declining to elaborate on what actions, if any, AMP would take against planners who did not achieve the required qualifications by the deadline, Caprioli instead suggested clients may be transitioned to advisers that do.
“In the event that at the end of that period, advisers haven’t met that level of qualification, and barring any special circumstances…then we’re very clear that customers will need to receive personal advice from those who are qualified,” he said.
Customer review, ethics addressed
The program also includes the establishment of a Customer Advice Review panel, which is expected to be in place by the end of 2014. An ethics and responsible decision-making program, in partnership with the St James Ethics Centre, is expected to be launched by mid-2015. Full details are outlined here.
A number of the measures echo those announced by Commonwealth Bank last month, in response to pressure from the Australian Securities and Investments Commission (ASIC) and Senate inquiries. Both Caprioli and Craig Meller, AMP chief executive, alluded to this and highlighted their belief in the importance of self-regulation in improving “consumer trust and confidence in the industry”.
“In light of recent events…there’s certainly a spotlight on our industry, on financial advice and on the financial advice profession, and we absolutely think it’s appropriate for the industry to take responsibility and take steps to address that, and as you’d expect, AMP needs to take a role in that as well,” Caprioli said.
Asked whether he expected other financial institutions would follow suit by implementing similar measures, he added: “That’s certainly one of the drivers for why we’re doing this today.”
“The work on our ethics program, we’re doing that on par with the industry, so all financial advisers in the industry can take part in the program, and we’re actually hoping that others will be joining us in that,” he said.
Half-yearly results
Caprioli’s comments followed the group’s half-yearly profit announcement, where AMP chief executive Craig Meller announced overall net profit of $382 million to 30 June, 2014 – down 3 per cent on the same period last year.
AMP wealth management earnings were up 16 per cent compared to the first half of 2013, which he attributed to its strategy of being “a leaner, more efficient and increasingly customer-driven organisation”.
Meller also referred to relative stability among AMP’s ranks of financial planners over the period.
“Adviser numbers have edged up 2 per cent over the half, at a time when total industry numbers are contracting overall, as the new Future of Financial Advice (FoFA) environment beds down,” he said.
Speaking about AMP’s wealth protection business, which has struggled in recent years amid challenges across the life insurance sector, he said: “We’ve seen an encouraging recovery.”
Operating earnings for the division were $91 million, compared with $64 million over the first half of 2013. Meller referred to “‘much better operating earnings than for the same period last year, but there’s still a way to go…to build a sustainable long-term base for the business.”
