AMP announces ‘transformational’ wealth strategy

The comprehensive strategy announced by AMP will see big changes and will likely include steep cuts to its large adviser network as the wealth giant moves towards automated advice.

AMP positioned the reinvention as “helping client realise their ambitions” and said it would include shifting focus to direct-to-client channels and digital solutions.

However, for advisers this likely means job cuts as the bank reshapes aligned advice by using “fewer, more productive advisers.”

Chief executive Francesco De Ferrari said the adviser network of AMP was over 2400 and they were critical to getting AMP to where they were today.

“This industry and profession is undoubtedly going through significant and radical disruption and transformation. We will stand behind advisers and support them through this complex transformation,” he said.

Mr De Farrari did say though that having gone through similar disruptions roughly a third of advisors left the businesses involved but those that went on transformation would see their business improve.

“We are not going to talk about numbers of advisers, it’s not going to be the number that counts. It’s the quality and professionalism that’s going to be critical,” he said.

Mr De Ferrari said that AMP would work with its advisers to make sure the transition to this new strategy was done in a supportive way.

“We want to continue to partner with our financial aligned advisers but we have to recognise that the industry trends are reshaping this business and we will partner with them to make sure we do this reshaping with the least collateral damage possible for them and for the client,” he said.

AMP will also further integrate the wealth management with AMP Bank solutions to target double-digit earnings growth.

The new strategy does not come cheap with the wealth giant anticipating it to cost between $1.0- $1.3 billion with its aim to be to drive growth, reduce costs and de-risk the business.

The cost-reduction program will achieve $300 million in annual run-rate savings by the 2022 financial year.

The program would be partially funded by fully underwritten $650 million capital raise along with the completed sale of AMP Life.

Last month it was reported that the AMP Life sale had been held up by the Reserve Bank of New Zealand and looked unlikely to proceed.

However, AMP has announced a revised agreement with Resolution Life with updated terms that will deliver a consideration of $3.0 billion ($2.5 billion in cash and $500 million in equity interest) with the sale expected to be completed by the first half of 2020.

The proceeds will be used to fund separation costs which remain at $320 million post tax, repay $800 million in debt and fund capital dis-synergies of $160 million.

AMP Wealth Management reported operating earnings of just $103 million in the first half of 2019, a 49.5 per cent decrease from this time in 2018.

Operating earnings were impacted by margin compression from MySuper fee reductions, advisers moving clients to contemporary solutions and the removal of earnings transferring with AMP Life.

Mr De Ferrari said the 2019 would be a year of transition for AMP as it looked to reset and de-risk the business.

“The capital raising and the AMP Life sale will provide the funds to implement immediately our new transformational strategy, which creates a simpler, higher-growth and higher-return AMP that’s focused on clients and ensures that our balance sheet will be unquestionably strong,” he said.

Mr De Ferrari said the business would be supported by a billion-dollar program to transform which would put them on the path to sustainable long-term value creation.

“We are reinventing our Australian business to deliver a proposition that fulfils client needs with whole-of-wealth solutions including banking,” he said.

Eliot Hastie

Eliot Hastie is a journalist at Momentum Media, writing primarily for its wealth and financial services platforms. 

Eliot joined the team in 2018 having previously written on Real Estate Business with Momentum Media as well.

Eliot graduated from the University of Westminster, UK with a Bachelor of Arts (Journalism).

You can email him on: [email protected]