AMP’s decision to manage Genesys financial planners towards the exit highlights the sort of tensions that increasingly exist between independently minded financial planners and institutionally owned licensees.
In a world of best interests duty, when the priorities of an institution push it in one direction and the priorities of financial planners pull them in another, something has to give. In the case of AMP and Genesys, it has resulted in the Genesys planners being forced to move to another AMP-owned licensee, or leave the group altogether.
Tensions between AMP and some of the Genesys practices have been simmering for some time, with the financial services giant advising them of its decision yesterday morning.
Professional Planner understands that a target date of April 30 has been set – just over five months from now – for Genesys practices to decide whether to move to another AMP licensee or to leave the group.
It is believed AMP conducted a nine-month strategic review into the sustainability of the business before making the decision.
However, Genesys planners say they have been keen for AMP to provide them with a version of the North platform to use, so they can discharge what they see as their best interests duty by offering clients a lower-cost option that competes with alternatives such as Macquarie Wrap, BT Wrap and Navigator.
A sticking point for Genesys financial planners is the use of the North platform, which they consider to be relatively expensive compared to alternatives, including BT Wrap, Macquarie Wrap and Navigator, owned by MLC.
“Is it North or nothing?” said one planner, who spoke on condition of anonymity.
“Because if it is, we would have to get a waiver signed by every single one of our clients. And we’d do that.”
Is ipac next?
The adviser also questioned the legal basis on which AMP could force financial planners to switch licensees, if the Genesys licence was not being closed down.
And he said that Genesys advisers had been given the choice of switching to one of three alterative AMP licensees – AMP Financial Planning, Hillross and Charter – but not ipac, prompting him to ask, “is ipac next?”
“And what happens to firms that are not ready to make a move [away from AMP], given that [the target date] is only five months away?” he said.
The financial planner also said the head of Genesys, Tim Steele, had indicated the Genesys licence would be maintained after that date. A statement issued by AMP yesterday made no mention of Genesys being shut down.
Platform fees
As another (non-Genesys) financial planner explained to Professional Planner in August, if he loses a client that pays him $20,000 a year in advice fees he hears nothing from head office. But if he takes one dollar off the licensee’s platform, the phone rings off the hook with demands to know what’s going on.
This neatly highlights the difference in priorities between some licensees and financial planners, and in some cases the differences are irreconcilable.
The developments at Genesys demonstrate the potential pitfalls of bank-aligned dealer groups folding non-aligned licensees, which don’t necessarily share the same culture, into their businesses.
Meritum Financial Group is another formerly non-aligned group that linked with an institution, but with more success so far. It was previously owned by Aviva, before being acquired by NAB’s MLC wealth management division in 2010.
When rumours about Genesys advisers first surfaced in mid-September, Stephen Trist, general manager of the MLC-owned AFS licensee, told Professional Planner he believed frustration over being dictated to could drive a breakaway.
“I don’t know whether it’s real or not [but] if there’s a group of advisers that want to break away from an institutionally owned licensee, I think it’s borne mostly of them feeling they’re going to be dictated to more and more,” he said.
“And so, I think a lot of them say, ‘Well okay, you own the license but you don’t own me’.”
AMP has an equity stake in a number of the 92 businesses that make up the Genesys network, and yesterday it was not clear what would happen to this ownership if a practice opted to leave the AMP fold.
The disquiet that has persisted over several months was fuelled by comments by AMP at meetings of Genesys practices. These indicated that if planners were looking for flexibility and freedom, then Genesys was not the place to be.
In CoreData’s 2014 STAR ratings – an assessment combining what a licensee’s own advisers think of it with what advisers outside the licensee think of it – Genesys was not ranked in the top 10, while ipac Financial Planning was ranked second, ipac Equity Partners fifth and Hillross sixth.
In CoreData’s 2013 Licensee of the Year analysis, Charter was ranked top, and Genesys was ranked eighth.
Multi-brand strategy
In an interview with Professional Planner in July, AMP’s group executive, advice and banking, Rob Caprioli, said the company remained committed to a multi-brand financial planning strategy.
“The advantage of the multi-brand approach is that customers have made a choice about who they want to engage with and who they want a relationship with, in terms of a particular adviser, and therefore the association they have made around the licensee and the brand,” he said.
“It’s absolutely appropriate for the customer to preserve that.”
Caprioli said that while shared services between licensees will be rationalised, each AMP licensee’s value proposition will remain independent and distinctive from the others’.
“There’s a number of services that you need across licensees; I can deliver that service more efficiently and effectively by having a bunch of specialists who can deliver that service across a number of different brands,” he said.
“The services you rely on – paraplanning, recruitment services, et cetera – I can lift the level of service and offer it more efficiently to you by having a centralised group of people where that’s their specialty…recognising that the value proposition for each of the licensees is maintained.”
