AMP isn’t shying away from keeping a vertical structure to its business but is adamant the work it has done over the last few years separates it from worst case scenarios like Dixon Advisory.
The firm prioritised the distinction between product and advice, but won’t completely separate it, instead focusing on distinguishing each business element of the service process.
Speaking at the Professional Planner Researcher Forum Monday morning, AMP Advice chief executive Matt Lawler said it didn’t deserve to be compared to Dixon Advisory, which did nothing to move away from a deeply vertically integrated model in the lead up to its high-profile collapse.
“Through the work we’ve done and the decisions we’ve made, AMP owns verticals but we’re not vertically integrated – that’s an important distinction,” Lawler said.
“There’s nothing wrong with owning verticals, but when it is integrated to a point where it affects the very person you’re trying serve then that’s bad vertical integration and unwinding that has been important.”
Every part of the chain needs to be “excellent” at what it does, Lawler said, and service providers can no longer “rely on feathering each other’s pockets”.
“Advisers will advise their clients and they’ll charge for that advice,” Lawler said. “Platforms will deliver an administration service and they will charge for that and the fees will be transparent.
“The investment side will be paid for by the investments made and portfolios that are constructed and there will be no money that moves across any of the three businesses.”
Don’t associate us with Dixon
Dixon Advisory, perhaps the dirtiest words an advice business could be associated with in 2022, has put the spotlight back on vertical integration in the lead up the Quality of Advice review.
Lawler said Dixon Advisory is still the extreme end of vertical integration, which AMP is not close to.
“We can’t say Dixon’s is an example for the rest of the financial planning profession,” Lawler said. “To do that would be grossly wrong and underestimating the hard work done by the sector to make sure the model is clean.
“That model is so far away from what everyone has tried to change,” he continued. “It was really disappointing to see that was allowed to happen.”
What does “good” VI look like?
UNSW academic Pamela Hanrahan, who served as an adviser at the royal commission, said Hayne recommended that conflicts had to be managed but she is sceptical as to whether the industry is managing its conflicts properly.
“It might be possible to have good vertical integration as opposed to Dixon-type vertical integration, but what we’re yet to do is say what that would look like,” Hanrahan said.
“Maybe the [Quality of Advice] review will be an opportunity to do that, but it’s got too much in it and doesn’t have enough time.
“I’ve seen us do a pretty bad job over the last 20 years of taking a reasonable, pure concept at the beginning and just piling more and more inconsistent rules on top of each other. I hope we don’t make that mistake again.”
Lawler said the royal commission lit a fuse under the industry to wake up and look at its practices.
“The biggest change is the structural change that’s taken place,” Lawler said. “We had a cosy environment where everyone was supporting each other and sometimes that was at the expense of the client.
“Now we’re all clear with the role everybody plays and they get paid for the value they bring to the table.”
This meant AMP improved at delivering customer expectations as opposed to having “cosy little arrangements with where everyone looks after each other”.
“I come from an organisation that was targeted by the royal commission as being the most vertically integrated in the market,” Lawler said.
“We’ve worked hard to unwind a lot of that and making sure each business stands alone in terms of what they do.”
