As AMP reaches the halfway point in its three year plan to reinvent its advice offering, current and former advisers report a shift in focus at the wealth giant from practice profitability to scale and risk mitigation.
When CEO Francesco De Ferrari’s announced AMP’s plan to reinvent its wealth management division in August 2019 the focus was on “fewer, more productive advisers” contributing a better bottom line for the division.
Current and ex-AMP advisers privately report that profitability is no longer a key focus for AMP, with even highly profitable small practices are being asked to merge with larger and more established “beach-head” practices that can better leverage scale and minimise risk.
An AMP representative said while its advice strategy “remains unchanged”, the practices that fall short of its standards are being asked to merge.
“It’s important all AMP’s advice practices are financially sustainable and able to support the infrastructure required to deliver high-quality, fee for service advice,” the representative stated. “We’re working closely with practices that don’t meet this criteria, providing a range of options including potential mergers with larger, more financially secure practices.”
According to a cross section of AMP-affiliated advisers, AMP isn’t inclined to help the smaller practices that are under threat become more stable. “They say you’ve got to grow and meet the benchmark but you’ve got to do it yourself,” one adviser said under condition of anonymity. “If you don’t do it in a year or 18 months you either amalgamate into another beachhead practice or leave.”
For those that are willing to merge with one of the larger practices under the AMP FP, Charter FP or Hillross licensees, AMP will offer every assistance.
“We’re supporting practices through this transition and will continue to invest in practices that are going forward with AMP,” the representative stated.
Wearing its Sunday best
While still very much in line with its three-year plan to reshape advice, AMP’s push for a smaller pool of larger, more compliant advice practices would also position a key plank of the business more favourably for potential buyers.
American investment manager Ares has been kicking the tyres on AMP since it tabled a conditional offer of $1.85 per share in early November last year, and the likely view is that shedding smaller practices can only make the firm’s wealth management division more attractive.
In terms of wealth management AMP would be plumping a more streamlined advice network; in mid-2020 it reported AUM per adviser had increased from $32.3m in FY16 to $47m by 1H 2020. Adviser numbers were also culled 21.3 per cent from 2,372 to 1,867 between 1H2019 and 1H2020.
AMP is also keen to highlight the success of its MyNorth investment platform, which saw net cashflows grow 52 per cent ($0.7b) from 1H2019 to 1H 2020.
Less attractive would be its share price, seemingly anchored around $1.60, the ongoing class action brought by aggrieved advisers over De Ferrari’s decision to cull buyer-of-last-resort multiplies, and a 42.7 per cent decrease in its wealth management profits from $103m in 1H2019 to $59m 1H2020.
Further, any potential buyer would need to understand the depth of AMP’s cultural issues, which De Ferrari said in August would be his “number one priority” in the second half of 2020.