AMP’s biggest challenge yet: silos to clients first

Alex Wade believes he knows where AMP needs to take its wealth business and how to get there, but despite his unwavering belief in the longevity of the once revered brand, Wade admits the company’s biggest challenge will be unhitching itself from the past.

Sitting at the top of the company’s CQ1 Circular Quay tower in Sydney’s CBD a week or so after AMP’s heavily anticipated strategy reset announcement in late August, the CEO of Wealth Management describes the steep mountain AMP has to climb.

“We were and we have been a very siloed organisation, which meant siloed around product. That’s a legacy we have to break so we can rebuild our focus on the client,” Wade says.

As part of the August announcement, AMP’s CEO Francesco De Ferrari said the group would be spending more than $1 billion on its wealth strategy reset, half of which it needed to raise from existing and possibly new investors at a time when its share price was trading at close to a dollar a share and its balance sheet remained in bits. The other half of the funding for its strategic reset would come from the sale of its insurance business to London-based Resolution Life, which has stalled at the last hurdle.

Being a client-centric organisation won’t come naturally to AMP, Wade alludes.

“If you’re in a client-centric business, you need services and product to meet the needs of the client and that has to be driven by the client,” Wade says, elaborating on his definition of client centricity.

“We do not necessarily need to manufacture product. We have product and we have good product which we are simplifying and making better for clients. But if we cannot deliver a product to meet client needs, then we will source it elsewhere,” says Wade, who was hand-picked by De Ferrari from Singapore-based Credit Suisse Private Wealth in January to take up the advice group executive position at AMP.

Choosing the right partners

Key to solving the puzzle of how to own and operate a large wealth business free from product subsidisation will be its ability to be selective about the advice partnerships it decides to invest in, as much as it will the advice practices it chooses to sever ties with and leave behind.

AMP has engaged big-five consulting firm KPMG to support its program of work with its sprawling advice network to make an assessment of the business’s strengths and weaknesses of practices, as well as make assessments on their more intangible future potential.

“It is an individual conversation with every practice. There are some phenomenal businesses, some have the potential to be phenomenal,” Wade describes, noting there are thousands of businesses to run the ruler over.

Wade says profitability will be an important measure of success for AMP advice businesses in the future, rather than revenue of or product sales as it has been in the past.

The strategy review began the day of the reset announcement and should be complete “very soon,” he says.

“There are the practices that may not stack up today; really good advisers, two-man band practices that are not sustainable businesses. We may want to retain that talent so we will merge it with a more sustainable practice,” Wade highlights.

For the top practices, AMP is co-designing new terms based on their ability to reach and maintain EBIT multiples, Wade says. The details of these terms have not been defined yet, he adds.

“We need to be focused on partnerships with professional, sustainable businesses. We are investing in those businesses with technology and support for the future. That has to be a true partnership model,” he says.

The final number in terms of the amount of businesses and the number of advisers – even the number of aligned brands– AMP ends up with has not yet been defined but will be clear this year by the end of this process, Wade says.

Noisy transition

In the meantime, Wade anticipates there will be a lot of noise as advisers within the network – many of which have been part of the AMP advice network for decades – come to grips with the revised valuations of their businesses. New Buyer of Last Resort agreements announced at the same time as the strategy reset have been discounted to reflect market values, superseding the multiples of revenue arrangements they signed up to before commissions were maligned by the royal commission and grandfathered revenue was banned.

Whether the strategy reset is a success won’t be apparent for another three-years, Wade acknowledges.

At the end of this period, if it’s successful, Wade describes a business that will use digital platforms, phones and face-to-face relationships to deliver advice depending on the needs of the individual client.

Wade reckons AMP has the components to make this kind of offering available; the company’s existing cashflow management and online education tools will fit the bill, meanwhile it’s superannuation and banking products can combine with its face-to-face wealth offerings to create a “whole of wealth” solution. All the business needs to do is break down the product silos and tie all the services together, he says.

Held to account

No one doubts the opportunity for a pure wealth business to step in where banks have turned their backs, but whether AMP is positioned to take the opportunity to deliver advice to the masses remains to be seen.

Wade thinks AMP has a good shot.

“The fact is we faced into the past, we wrote off a truck load of money to address the legacy and do a reset. We’ve announced we are going to invest a huge amount of in the go forward. I hope that will give people confidence – not just investors, or partners – that this is going to be different,” Wade says.

As this is likely to be the first time AMP will execute a client-centric rather than a product-led strategy, Wade admits the leadership team needs to be held to account.

“We seriously need to be held accountable for executing. I’m not sure we have been strong on accountability in the past. I think we spent a lot of time tripping over ourselves and a lot of that has to do with the siloed structure,” he says.

“I believe we have good people and people who see the opportunity,” he says. “Now we have to prove it.”