Francesco de Ferrari has vowed to drive cultural change at AMP after admitting that driving the group’s operational transformation has taken precedence since he took the role of chief executive.
After the shock resignation of AMP Australia head Alex Wade and uproar over the appointment of AMP Capital’s Boe Pahari – both were anointed by de Ferrari himself and have been accused of lewd misconduct – the CEO admitted on 2020H1 results calls that culture has not been his number one priority.
“I acknowledge that to-date I’ve been heavily focused on resetting operational aspects of our business,” de Ferrari told media this morning. “Considering recent events, I’ve committed to employees that driving cultural transformation will be my number one priority in the second half of the year.”
While de Ferrari didn’t explicitly link the shift to Wade and Pohari, flagging ‘recent events’ was a giveaway that executive misconduct as part of a broader cultural malaise is now his most pressing issue.
“Driving cultural change is key to unlocking AMP’s potential and driving shareholder value… but know we have more to do,” de Ferrari said, before adding that a working group on culture and an ‘inclusion task force’ had been recently established. “We’ve already had two meetings,” he said.
De Ferrari was peppered with questions about culture and the resignation of Wade during the morning’s first call, with the beleaguered CEO’s frustration eventually showing.
“I would love to get some questions on results and how the business is going for our clients,” he said at one point. “It’s important that I am able to tell the story of what our employees have achieved.”
Precipitous earnings decline
The group’s H12020 results were predictably poor given the massive outflows experienced by the business combined with the effects of the pandemic.
Wealth management operating earnings fell 42.7 per cent to $59m, banking fell 29.6 per cent to $50m and AMP Capital dropped 40 per cent to $72m. With losses for the NZ business taken into account, AMP’s operating earnings fell 37 per cent on the same period last year.
There were positives for the group, which de Ferrari did his best to linger on.
The sale of AMP Life was a “major milestone”, he said, which strengthened the capital position and will enable the group to return a dividend to shareholders.
AMP also repurchased it’s 15 per cent stake in AMP Capital from Japan’s MUTB for $451m (plus a special dividend of $9m) after offloading it for $425m in 2012. De Ferrari said he was “absolutely not” giving up on Asia, but the Japanese firm’s willingness to sell the stake could be read as an indictment of AMP’s current standing in the region.
Despite a small bump at day’s opening, AMP’s share price value – around $1.50 at the time of publication – is a near-nadir for the group.
“The share price is not where I want it to be,” de Ferrari said.
BOLRs ‘out of market’
The CEO was challenged a number of times on his treatment of advisers via buyer-of-last-resort (BOLR) arrangements, and called the decision to cut multiples from 4x to 2.5x “one of the hardest decisions” he’s had to make.
“We needed to readjust our commitment terms linked to BOLR because they were out of market,” he said. “We have done this in line with our responsibilities and commitments.”
Asked how he felt about the impending legal challenge from a cohort of ex-AMP advisers with respect to the BOLR changes, de Ferrari was resolute.
“We feel strongly that our position is the right one and we will defend it,” he said.
De Ferrari responded to a question about declining numbers by highlighting tough educational and regulatory reform. It was going to take AMP the full three years earmarked in the transformation project to understand which advice practices are “compliant and professional”, he explained, before adding that he expects an eventual 30 per cent decline in adviser numbers in line with his experience with European advice reform.
“This does not materially affect our outflows,” he said. “While 30 per cent potentially don’t make it out the other side the practices that do tend to be a lot more profitable.”