AMP brushes off adviser exits

Addressing a media conference on Thursday, AMP chief executive Francesco De Ferrari said the key to the strategy, which had seen AMPFP shrink from 1,414 advisers in December 2018 to 809 in mid-January 2021, was creating a “more sustainable setup” for advice businesses.

“We're definitely looking to have advice practices that are sustainable, profitable, and therefore can invest in the necessary compliance and professional standards of their advisers,” Mr De Ferrari said.

“As we went into our advice reshape program, we gave our advisers that we felt were not meeting the required criteria or were not really sustainable, [the choice] to either sell us their business back, or merge with larger practices that can ensure a more sustainable setup.

“Almost all of the adviser attrition is driven by our advice reshape program. It is really a deliberate effort done in partnership with the advisers to try to make sure we have a professional and compliant network that can effectively deliver great advice for our clients and can be sustainable, also from a P&L point of view.”

While AMP said the reshape strategy had “substantially progressed” in 2020, profits were down 44 per cent in its wealth management business compared with 2019, with total advice revenue shrinking 20 per cent to $115 million.

The group attributed the poor result to “weaker investment markets and pricing and legislative changes”.

However, Mr De Ferrari said revenue per adviser was trending significantly up, while many advisers were taking the merger option rather than exiting the business.

“We are really tracking the average AUM per practice, and how that is moving. Pleasingly, our AUM per practice has gone up more than 40 per cent this year,” he said.

The wealth management business also saw $8.5 billion in net cash outflows over the year, $3.6 billion of which AMP said were due to the early super release scheme.

The group said it had completed 75 per cent of advice practice exits expected under the transformation strategy, with around 100 more still to come.

It flagged it expected to transform its salaried advice business into “a multi-channel proposition” with more reliance on phone-based and intra-fund advice, and decouple advice from product by focusing on standalone profitability of its dealer groups, in a similar move to IOOF.

The comments come following the news that US investment manager Ares had dropped its bid for the wealth giant, and that its portfolio review had concluded Mr De Ferrari's transformation strategy was "likely to be the optimal outcome for shareholders".