While the royal commission didn’t recommend the break-up of AMP’s vertically integrated business model, the reputation of its wealth arm has been materially damaged and it will likely take several years before FUM – and earnings – are back on track.
But while AMP might be down, it isn’t necessarily out, due to the relationships it has fostered over the years and the sheer reach of its wealth arm.
“We believe it would be difficult for a new entrant to easily reproduce these types of relationships and replicate AMP’s distributional reach and brand recognition among Australian financial advisers and the general public,” Morningstar said in a note.
“These strong relationships also generate switching costs, both monetary and non-monetary.”
For advisers, those non-monetary costs include the difficulty of learning a new wealth manager’s procedure and understanding its systems. For clients, non-monetary costs could be the hassle involved with closing an account and opening a new account with another wealth manager.
However, Morningstar does expect a “significant reduction” in AMP’s network of financial advisers over the next few years due to the material reputation damage suffered from the royal commission, as well as stronger educational requirements and the phasing out of grandfathered commissions. The reputational damage will also make it harder for AMP to attract clients and new FUM in the next few years.
AMP’s wealth arm has so far done little to mend its reputation, reporting a disastrous NPAT of $195 million in 2019 – 48 per cent lower than 2018. At the same time, CEO Francesco de Ferrari also received a bump to his short-term bonus of more than 200 per cent of his fixed base in the hopes that he will be able to execute a bold new three-year plan for the company.
But that might be a tall order in the face of “more fines, compensation payments, court actions, licence changes and potential class action lawsuits”.
Morningstar also slapped a “poor” stewardship rating on AMP, but noted that the business was working to reform its culture and had already made sweeping changes.
As someone worked for AMP before all I can say is this company will do anything unethical to earn or retain their profit. They certainly don’t give a shit about their clients and even less about the ASIC. It’s a goddamn sinking boat.
the market is telling me negativity is falling on deaf ears accept the things you cannot change
“A certain friend in uncertain times’ as long as they have someone to throw under the bus along the way and do not have to face up to the manner in which they are conducting themselves. Yes, there is new management and they have inherited a lot of this mess, but their actions to date show a complete lack of support to those advisers that helped build the wealth management business to where it is. AMP will eventually judged by its actions and a lot of them in recent times have been very poor and unconscionable, publicly saying one thing and then doing the complete opposite behind the scenes.
The rot still exists in many levels of management and at the top, it has gone from bad to worse. If you think the RC was damaging, wait for the revelations from the multitude of class actions that are on their way.
This is a company that, as part of its standard business practices, seeks to breach legal agreements for pure commercial, bullying reasons. They do this deliberately, repeatedly, and to firms and persons that they have been in business with for years. It is standard procedure for them to breach contracts. Nothing has changed since ‘new’ management took over, the same old incompetent wealth destroying middle managers are there. Every adviser with any connection to AMP knows this to be the case.
The most recent valuation (price target) for AMP by Bell Potter is $2.25 (ref Aspect Huntley public website) and I think that’s very optimistic. AMP now have 6,519 employees according to the FS just released – which is just staggering. Employee numbers have gone up every year for the last 5 years. That cost base, combined with incompetence, is what will be the end of this company. Clearly Morningstar don’t know how to do the analysis.
If success is reliant on the apathy of clients and advisers too disengaged to learn new system and processes then this company is dead in a few years. The technology is making it easier for advisers and clients to move. I’m a little surprised that Morningstar see apathy as a legitimate strategy.
AMP’s reputation has been “trashed” because the truth has finally come out. The truth hurts hey?!
Kiss of death?
I used to work at AMP and it by Farr the worst culture I have ever worked in. There is no promotion or discussion of corporate values. Management are apathetic and can’t make timely decisions, thereby wasting more money. This company does not deserve to exist
AMP employees 5001-10000 today
Around 50% of AMP employees took part in Employee Volunteering Program Launched Employee Share Plan to create alignment with shareholder experience
A$100 million donated by AMP Foundation since inception In 2020, partnered with advisers to offer pro bono financial advice to Australians impacted by bushfires Community care
Non of that is AMP.
i remember when James hardy was forced to pay for the pain and suffering they inflicted on Australians
more fines, compensation payments, court actions, class action lawsuits”.but they never folded the company up James hardy kept producing the asbestos free products making money and giving a percentage of the earnings back to the victims forever . by pulling your superannuation out of amp you are trying to kill the chicken that lays the golden eggs slowly but surely all the court cases will have there day ..
when Australia post next delivers to your house think to yourself have they done whats best for themselves or anyone for that matter …
James Hardie gave australia the middle finger salute, moved to the Netherlands and has some ridiculous Irish Withholding Tax agreement and underfunds its compensation scheme. If I could kick them in the guts too I would.
AMP has new management who has to fix the problems they did not have any hand in how would you like it if you got a new job and you had to cop flack it is an Australian company trying to move on and support Australians and what about the shareholders what have they done wrong they alone have paid the biggest price most Australians purchaced there shares above $5.00 they are the ones who are getting hurt there motto is ” (“A certain friend in uncertain times”).and for Australians times are uncertain supporting AMP is supporting people just like you aussies
The new management are however making sure that smaller advisers who AMP lied to are paying the price whilst renegotiating their bonuses to take away funds from shareholders. Management are being paid to do a job and they are doing it badly — just probably not as badly as the last lot of incompetents that were employed. I have never seen a company with such a poor culture that has done nothing about it for years.
If ‘smaller advisers’ are costing AMP more to service, monitor and manage than they are paying AMP in fees, then what else would you have them do? What would you do if they were your clients?
Max, there is no room here for logical questions. This is the 4chan of the financial planning world. people come here to spread hate and negativity only.
Sounds like you need a Financial Planner mate. What are you doing buying this junk?
AMP has the best of the best driving now the rot has gone the repairs are underway its Australian and its our AMP
In my opinion AMP is really like a bad bank.
The only customers and advisers left there are the ones who are either disengaged and non performing or are trapped there for product or contractual purposes.
Really, it’s in the interests for the Government (and for each customer) to mandate the windup of AMP and for it to get APRA and ASIC and the rest of the FS ecoystem ready for the orderly transition of all the accounts.
It doesn’t exist to do anything except collect fees from its customers and it has no real purpose in the real economy. Other super funds exist, other fund management businesses could all do a better job.
Interesting perspective, i agree they are a bad bank, but they have an opportunity to do right now, by all stake holders. Vigorously defending the BOLR terms is not in the interest of all stakeholders, only shareholders. So you can say that old habits really die hard at AMP
Thanks I am glad you appreciate it. Reviewing BOLR is not in the interest of non shareholder stakeholders at all. BOLR was an attempt to ring fence the business from book movement and create a restricted secondary trading market with a guy who sat there buying and selling books.
The fact that BOLR was vertically integrated with AMP Bank and lending money to buy books was dependent on one thing – trail fees.
That was fine when AMP was like the Prelude LNG floating wellhead, where it was sitting there to capture and process these trail fees. But you already know that model got blown up recently when the fee for no advice scandal came to a head and then the whole no trail commissions anymore at all was the final nail in the coffin.
AMP as your offshore processing ship just harvesting income from $ flows won’t work in 2020.
Now, you have to fight for the customer dollar, not just extract them from some undeveloped and unserviced resource and keep your ship anchored there.
That means it takes the number of relationships possible, where you can physically service your customer, to like maybe 50 customers a year?
I mean one meeting and review a week becomes ok I guess? So if you have a 50 customer cap, then you have anything above that, it’s unworkable and there’s no way you can run a business with 200, 300, 400 500 accounts. I have more than 600 friends on facebook and like 10k+ instagram followers and there’s no way I can engage with everyone on a superficial level let alone give them financial advice.
Now that the game has changed, the previous model of tethering everyone and everything to AMP becomes an anchor.
As AMP, what held people to you now holds you to them and and reduces your flexibility to maneuver.
Ferrari gets stuck playing one dimensional chess here trying to say the right things but the reality is it has no “why” and he has no real choice ahead of him.The targets that he gets given are not really relevant or material.
There’s no way that the quantum of customers can ever get serviced properly by those numbers of advisers.
So what do you do?
You simplify, chop those who are working only on trail and unable to develop a real advice business, and then let the business shrink to right size itself.
They aren’t going to grow FUM in this environment.
Like, why would someone want to work with AMP or to work at AMP or to invest with AMP?
If you cannot answer that question then it shouldnt exist and people should be doing everything in their power to kill it off.
Ferrari may be a decent guy but he’s got no chance of turning it around.
Twitching corpse