Financial losses for AMP Advice are expected to be halved as the company continues to the “reshape and transition to a contemporary service model”.
Announcing its 1H22 results on Thursday, underlying net profit after tax (NPAT) was a loss of $30 million (compared to a loss of $85 million in 1H21) which it attributed to the scale of the advice business and impairments not being repeated.
AMP chief executive Alexis George told Professional Planner this is part of the commitment to deliver a sustainable business.
“Matt [Lawler, AMP Advice CEO) and the team have done a lot of work in the advice space and you can see we’re on track to halving the loss we delivered last year, around $150 million.”
George says the proposition of the business is important and she wants “to be here to support” advisers.
“We’re a service licensee. It’s important to have a group like ours that’s going to stand behind the advisers when things go well or don’t go well. We have to convince people in the market that’s who we are now,” George said.
George says she doesn’t want to make grandiose promises the 170-year-old organisation can’t deliver.
“I know that’s what Matt’s approach is and certainly what my approach is.”
During a conference call with investors on Thursday morning and chief financial officer James Georgeson, George said AMP has moved the advice business into a “contemporary advice business” where advisers are prepared to pay for services.
“We’ll offer both a standard package as well as additional ones. Revenue per adviser is starting to improve. Adviser numbers are down but that is to be expected as we go through this transitionary period.”
George reiterated her position that an easier regulatory environment would help achieve break-even for the advice business by FY24.
“We’ve seen a real preparedness from regulators, government and the industry to lean into this problem,” she said. “It’s not like our retirement system has become more simplified. Advice is clearly something many of our customers need.”
Georgeson added that the loss in advice reduced materially following the sale of the employed advice business at the end of 2021.
Advice revenue increased $7 million to $30 million with revenue growth in portfolio of equity investments in 1H22 and impairments in 1H21 not repeated, offset by the impact of the employed advice sale, and costs were reduced from $101 million to $66 million (1H22).
Sins of the father
Lawler recently spoke at a roundtable about re-branding the industry. For some corners of the industry hearing AMP talk about the industry’s image will conjure up some unpleasant emotions.
However, this puts Lawler (who joined 14 months ago) and George (who just celebrated her one-year anniversary) arguably in an unfair position; both are tasked with repairing the company. Conexus chair Colin Tate described George’s role as the toughest in the industry and neither had any association to company’s previous misgivings.
George says being in this job requires resiliency. “It takes a while for to forget the past, but personally, whether it’s the last 12 or 18 months, we have done to change so much about the way we go about doing business, the way we talk to our advisers, the way we are transparent with our advisers.”
She added those working at AMP must continue to be forward-looking but understands that it’s not easy for others to forget the past.
North star
AMP’s flagship platform North continues to be a winner for the wealth management arm with cash flows from independent financial advisers up 49 per cent.
However, 1H22 underlying NPAT is $36 million – much below the 1H22 total of $66 million – which AMP stated reflects planned repricing communicated to the market in 2021, investment to support growth and hedging losses on partially-guaranteed pension product North Guarantee due to market volatility.
Overall platform assets under management reduced to $63.9 billion from $71.1 billion due to weaker investment markets which was partly offset by positive net cashflows.
George says AMP has traditionally relied on its aligned dealer group to support North but is now confident it has a “compelling proposition” to take to the broader market.
“That’s to the benefit of our aligned group as well as the external groups,” she says. “Now it’s about telling the story; the team has done the hard work on building the proposition, now we have to consistently tell the story.”
Gift for shareholders
The complete business saw total underlying NPAT decrease almost a quarter to $117 million from $155 in 1H21.
Due to the “strong capital position and the simplification” of the business, AMP will return $1.1 billion to shareholders, but will not declare a dividend in 1H22 which is in line with previous guidance.
This will consist of a $350 million on-market share buyback and $750 of capital returns planned in FY23 subject to regulatory and shareholder approval.
AMP will also allocate approximately $400 million liquidity to pay down corporate debt and de-leverage the balance sheet.
The sale of Collimate – the rebranded AMP Capital – will be completed this half.
Outlining the key items of note in the underling profit, Georgeson highlighted $22 million for client remediation and related costs that related to the APRA enforceable undertaking against the superannuation funds they committed to in November 2021 and legal costs relating to defending class actions.
“We’re a service licensee. It’s important to have a group like ours that’s going to stand behind the advisers when things go well or don’t go well. We have to convince people in the market that’s who we are now,” George said.