Fund managers are beginning to see indicators that AMP has turned the corner and its share price has reached a nadir, with a reset of its wealth management operations and a new leadership spine seen as positive signs in the beleaguered company’s efforts to reinvent itself.
After nine days in the CEO’s chair, ex-ANZ deputy CEO Alexis George impressed analysts during last weeks results call. But it is the strategic moves made by the company, especially across its wealth management enterprise, that experts believe will help AMP reinstate its social licence and eventually breathe life into its share price.
Shortly before the results call, AMP Australia boss Scott Hartley and new head of advice Matt Lawler announced AMP was abandoning its buyer-of-last-resort deals and institutional ownership of client books by the end of the year. Both were lucrative strategies that succeeded in keeping revenue in-house at AMP for years, but have long been viewed as draconian and manifestly unfair to advisers.
According to Simon Mawhinney, chief investment officer at contrarian fund manager Allan Gray, the trajectory of AMP advice before the announcement was “unsustainable”.
“If AMP had carried on along that trajectory I think something would have broken and snapped,” Mawhinney tells Professional Planner. “At least now there is a chance that AMP wealth management will succeed, whereas the counterfactual was that AMP’s entire infrastructure of advice was unsustainable and all advice licensees would need to cease.”
Allan Gray has a lot skin in AMP’s game, with about $72 million dollars worth of shares held in its Australian Equity fund alone.
Mawhinney says relinquishing ownership of client books to the advisers that built them, in particular, was a necessary step for the group to contemporise.
“That’s an important part of it, I’m very certain of that,” he says. “More contemporary arrangements make sense, I would be surprised if all shareholders didn’t support this.”
Outside of wealth management, Mawhinney cites the restructure of AMP Capital – in the wake of failed sale talks with Ares Management – as a sign the company is willing to make the hard decisions required for a significant reset.
“In an ideal world it wouldn’t have been necessary to separate AMP Capital from AMP, but it is today,” he says. “That they’re willing to is another litmus test whether AMP is willing to affect change.”
Making those hard decisions is a brand new leadership group that appears willing to address AMP’s issues head on.
When ex-Sunsuper boss Hartley joined in in January it was his discussions with advisers that led to the abandonment of BOLRs and AMP’s client ownership. When Lawler joined last month he was unafraid to call the brand “tarnished” and admit the need to “take the handcuffs off” advisers.
Then there is George, the former accountant who is in many ways the antithesis of her flashy predecessor, Francesco de Ferrari.
According to Jun Bei Liu, portfolio manager at Tribeca Investment Partners, the new CEO is a “welcome change”.
“She presents really well and the feedback is that she’s a leader, not a US-style CEO,” Liu says.
Liu, whose firm has no significant investment in AMP, says she was encouraged by George’s comments about streamlining the company further during the recent results call.
“She made a comment I thought was interesting, saying that robo-advice wasn’t necessarily what they were going to do,” Liu says. “Many people thought they would, but she wants to improve the back end and automate the advice process. The back office is set to improve a lot, and saying that the face-to-face interaction with the advisers is important was the right thing.”
Wait and see
Whether AMP’s recent moves are enough to right the ship is anyone’s guess.
It was only a year ago the group’s advisers were avoiding telling prospective clients they work for the company, and the lingering court case over its BOLR deals reflects its strained relationships with advisers.
Like any listed company, its share price will be the best bellwether for AMP’s fortunes. The company hovered around $10 per share 20 years ago, then $3 per share five years ago. Today it’s fighting to stay above $1 per share.
Mawhinney is either confident of a turnaround or trying to generate some positivity to kickstart his firm’s massive investment.
“I honestly think the ship has turned,” he says. “I think there’s been a cultural reset, and some of the changes in wealth management are indicative of a company that is adapting.”
Liu agrees, but like many investors and observers she’s heard the rhetoric before. This is far from the first iteration of AMP’s reinvention.
“I think [the share price] has been probably bottomed, but to see it meaningfully going anywhere you need to see the execution and see evidence it’s turning the corner,” she says. “The strategy is one thing, but AMP has been through so many reviews… so there’s a level of wait and see.”