AMP will strip the foundations of its institutional advice business with a suite of reforms aimed at shedding legacy arrangements and better positioning the group in the post-royal commission era.
The institution will release its ownership of clients, dump buyer-of-last-resort arrangements and introduce a new service model in an effort to modernise the business and attract advisers after several years of turmoil.
“We’ve evolved a lot”, managing director of advice Matt Lawler tells Professional Planner. “We wanted to make clear what you get when you’re dealing with AMP.”
For years, BOLR arrangements were highly successful in keeping AMP’s vast network of clients within the institution’s fold. If an adviser left the business, the clients stayed. If a principal wanted to sell up, the business was retained.
By the end of the year, however, BOLR arrangements will be terminated.
Advisers will still have the option to sell their business back to AMP at the marked down rate of 2.5 times revenue in the interim.
More importantly, AMP will now give principals the right to take ownership of their own clients instead of the institution retaining those rights. According to Lawler, who will speak on the topic at Tuesday’s Best Practice Forum, this is a crucial step in redressing the relationship between AMP and their advisers.
“There’s a mutual benefit there,” he says. “From our point of view we move into a relationship that doesn’t involve handcuffs. And if we deliver great services to them they choose to stay, which has a cultural impact on us.”
On a midday call with media, a candid Lawler explained how the practice of institutional client ownership is a “a bit of an overhang” from the life insurance industry.
For AMP to move forward with its adviser cohort, the managing director said, this dynamic needed to change.
“If you’re handcuffing and penalising people they have a different relationship with you.”
There is in Lawler’s words an acknowledgment that AMP’s previous modus operandi was not conducive to good relationships with advisers. The managing director says he can only focus on the future, however, and taking steps to improve AMP Advice.
“The business has been for the last couple of years dealing with a number of things, and we had to deal with those things before we could then ask what the future business looks like,” he says.
“It’s important for me to acknowledge and respect the past but there’s one thing I can’t do, which is to change the past.”
AMP’s in-house representative groups were key in the release of institutional ownership, Lawler notes, adding that he was having conversations with The Adviser Association and the Authorised Representatives Association even before he joined AMP in May. “They’ve been very supportive in helping us shape the reforms.”
You get what you pay for
In tandem with the handling of AMP’s legacy issues, the leadership team of Lawler and AMP Australia chief executive Scott Hartley have put together a new service proposition and fee arrangement for advice practices that moves the company more in line with prevailing industry models.
AMP will take a ‘hub and spoke’ approach to licensing, with authorised reps signing up for core services and having the option to take up a range of other services under a ‘user pays’ format.
“That could include licensing but it may not,” Lawler says, explaining that AMP will look to subscribe more self-licensed advisers to its fledgling services-only model in the near future.
The new offer for AMP-licensed advisers will be phased in over 18 months for the group’s 400 or so practices, and will be priced without the discounts typically afforded by product subsidies.
“You get what you pay for, we are increasing fees,” Lawler said on the media call. “We’re repricing for risk and the economics of running an AFSL that cannot and should not include product subsidies.”
Still an active buyer
Despite the days of BOLR agreements now being numbered, AMP will still consider itself a potential buyer of businesses when advisers look to move on.
Lawler says leadership has “great relationships” with the adviser cohort, and is largely aware of what businesses are planning to stay or go. If opportunities present, AMP will still be active in making deals happen.
“We are an equity owner so we do take equity in larger businesses, but we would also be facilitating mergers and acquisitions,” he says.
“We might be talking to one business owner about retiring and another about expanding, and we’d be looking to pair those two up.”