AMP’s equity ownership in several Genesys financial planning practices is proving to be a stumbling block to the financial services giant’s plan to migrate Genesys practices and advisers to alternative AMP-owned licensees.
AMP announced in November last year that it had completed a strategic review of Genesys and planned to “rationalise the business and offer Genesys practices a smooth transition to other AMP licensees”.
AMP has about 3800 financial planners in total, across AMP Financial Planning, Charter Financial Planning, Hillross, Horizons, ipac and smsf advice. Genesys has about 200 advisers nationwide, and its 92 financial planning practices have until April 30 to decide whether to shift to another AMP licensee or leave the AMP group.
Hidden GEMs
It is understood that AMP holds equity in about 20 practices, known as GEM firms. If a GEM firm decides to leave the AMP fold, it will have to buy back the stake held by AMP.
AMP, and AXA Asia Pacific before it, bought into some Genesys practices at times when the businesses commanded higher multiples than they do today. This has made it prohibitively expensive for some practices to buy the equity back, and AMP is naturally unwilling to sell back the equity at a loss.
Genesys practice principals remain unwilling to speak publicly on these issues for fear it may compromise negotiations with AMP on a range of issues, including the possible buyback of equity. However, equity is not the only thing exercising their minds as they consider their options before the April 30 deadline.
Professional Planner understands that AMP does not intend to shut down the Genesys licence, and the heads of several practices are privately examining whether AMP can force them to move on if they do not want to – if the value propositions put forward by other AMP licensees are unattractive – or if they can’t – because the practice can’t afford to buy back its equity from AMP.
Shareholders’ call
The decision fora practice to switch licensees is its shareholders’ to make. Professional Planner understands that AMP will exercise the votes attached to its equity stake. Its interests may be at odds with the interests and wishes of other shareholders. The situation is complicated further where AMP has appointed representatives to the boards of the businesses in which it owns equity.
The head of one practice says: “These individuals have the obligation in law to come up with the best solution for our business, not for AMP.”
Another says: “If we’re doing our due diligence on what is the best course of action for us, then the AMP directors are conflicted.”
And a third says: “We are not going to be told what to do.” The person says it is not clear in whose interests the AMP-appointed directors are obliged to act: in the interests of the Genesys practice in their role as directors of that business; or in AMP’s interests, as representatives of that business.
A statement provided to Professional Planner by AMP last week said: “AMP continues to engage with Genesys firms in helping them make an informed decision about their future.”
“We remain committed to supporting these firms and are hopeful and confident that the great majority of firms will opt to remain with the AMP group,” it said.
“For a number of firms who have already confirmed their intention to remain with AMP we are now formally commencing the legal and transition process.”
