AMP adviser satisfaction and practice revenue continues to increase, but the licensee business still operates at a heavy loss one year out from its breakeven target.
AMP reported to the ASX on Wednesday morning that in FY23 underlying net loss after tax in its advice division improved to a $47 million loss compared to a $68 million loss in FY22, and a $146 million loss in FY21.
Despite hints last year the group may look to make changes to the advice business in a similar vein to Insignia Financial’s licensee divestment, AMP chief executive Alexis George tells Professional Planner the FY24 breakeven plans takes precedence over any other decision.
“We are still running hard – we have to make this business sustainable if we can even consider alternatives,” George says.
“I know some of our competitors have taken different approaches by spinning out loss-making [licensees], but our view is we need make sure we got the right technology, it’s sustainable and then we can talk to our advice partners about various options that may be available.”
George identified costs, and not revenue, as the primary concern with the current financial year to be focused on cutting costs on under-utilised services.
“We definitely have opportunities in technology – we, some time ago, started to build some technologies that I don’t think are appropriate for a modern advice network,” George says.
“That’s probably the primary one, but we have to keep evaluating the services advisers want and are willing to pay for and we were delivering a lot of services.”
Controllable costs reduced 15.2 per cent from $138 million to $117 million, while variable costs decreased 88.9 per cent from $18 million to $2 million.
But until costs come down and the firm’s advice arm hits breakeven, George says there is no further plans to shake-up the business without deliberate consultation to the network.
“We’ve spent a lot of time regaining the respect and [group executive for advice] Matt Lawler in particular has spent a lot of time regaining the respect of our advice network and I ain’t gonna destroy it with some stupid decision that doesn’t involve them,” George says.
“We’re just focused on delivering on what we say we’re going to do – don’t make big promises you can’t keep, and maintain the respect.”
While costs came down, advice revenue also decreased from $56 million to $50 million, despite higher revenue per practice which was $1.75 million, up from $1.59 million in FY22.
Just over half (51 per cent) of AMP aligned practices achieved more than a $1 million in revenue, compared to an industry average of 30 per cent calculated by Adviser Ratings.
Internal research also found adviser satisfaction scores improved to 81 per cent from 68 per cent in the previous year.
Despite those improved metrics, George is confident the pricing of the services it intends to continue to deliver is competitive. Instead, the focus is purely on cutting unnecessary costs to the business.
“I am very proud of the fact that advisers are earning more than most in the industry,” George says.
“We started providing a lot of services they didn’t want to pay for and we just have to be really rational about that. They want us to be rational, they don’t want to be part of licensee that loses money either.”
The platforms business remains healthy with underlying NPAT increasing 38.5 per cent to $90 million.
North’s strategy of targeting independent financial advisers (IFAs) has seen IFA inflows increase 33 per cent year on year.
The group has relationships with roughly 1300 AFSLs representing 74 per cent of the addressable (based on a total of 1866 AFSLs which excluded limited advice licensees).
