‘The world is changing’: Why AMP is exiting advice

On Thursday morning, AMP announced on the ASX that it has entered into a strategic partnership to offload the majority of its stake in three licensees and its Jigsaw offering, while also selling off its minority stakes in 16 advice practices.

Entireti, itself formed earlier this year through a merger between Fortnum Private Wealth and Professional Financial Services, will take control of the licensee side for $10.2 million, AZ NGA will acquire AMP’s advice practice holdings for $82.2 million.

Speaking with ifa, AMP chief executive Alexis George said the “world is changing, and we need to change as well”.

“AMP has been in the business for 175 years, and arguably started as an advice business of sorts, with tied agents through the life insurance business,” George said.

The CEO explained that there have been extensive consultations with AMP’s advisers and firms over the last 12 months, leading to the decision that it was no longer the right fit for either party.

“Advice is evolving and doesn’t naturally sit inside a listed or APRA regulated entity,” George said, adding that the structure of the deal means there will be “very little change” for advisers as they will remain under the same licensee.

“Clearly, the AMP practices, at a point, would need to rebrand, but most of them use their own name anyway, and we’ll support them with the cost of doing that.”

AMP Advice group executive Matt Lawler will move across to the joint venture entity – provisionally named NewCo – and take the CEO role.

Under the terms of the deal, Entireti will own 70 per cent of NewCo and AMP will have control of the remaining 30 per cent.

Lawler told ifa that “continuity of services” is an important factor for AMP’s advisers, highlighting the need to ensure that the transition is “seamless”.

“You don’t want this decision to create a whole lot of work for them, so the way it’s been structured is that there is no work for them,” he said.

“There are no decisions that they need to make. We’re actually lifting the licenses and bringing them across, that’s actually really important to them.”

According to Lawler, this is a move that advisers want to happen, noting that many of the details of the partnership originated through the adviser consultation process.

“The next evolution is for these businesses to be standalone and to be professional services businesses, not connected to product providers, which was the old model. I think advisers are actually looking forward to that,” he said.

George added that it is a positive step that “vertical integration is gone” from financial advice.

“I applaud that, to be honest,” she said.

“I think it’s important that that goes, and I think the need for advice continues to increase.”

Australia’s new largest licensee owner

In announcing the partnership, the firm’s noted that the combined entity would have in excess of 1,300 advisers under its banner, making it the new largest “financial advice business service provider”.

As things currently stand, the latest Wealth Data numbers show 826 advisers under AMP’s AFSLs and 362 across Entireti for a total of 1,188. Adding in the 126 advisers attached to Jigsaw, AMP’s self-licensing arm, puts the final figure at 1,314.

Speaking with ifa, Entireti managing director Neil Younger said the deal marked a “really significant day” in financial advice.

“We’re really excited to be part of what we think will be a really exciting next phase for both our business and for advice,” Younger said.

“It’s a big strategic decision for [AMP] to essentially move out of advice in the way that they’ve chosen to do. They wanted a partnership, they sought that in the market. We participated in a lot of conversations around how they could look and we identified the alignment with what we were trying to achieve.

“We didn’t just go out and searching for another 900–1,000 advisers, but that’s how many they’ve got. Together, we fulfil our ambition as a very large-scale advisory network.”

He added that while moving such a large number of advisers across was certainly a big task, Entireti isn’t daunted by the scale of the migration.

“We’re applying a lot of resources to this transition, along with AMP as well, to get all of that right.

“A number of the participants within the Entireti business, myself included, I come from a world of running very large businesses, so we’re not daunted by the scale, and we’ll handle the complexity, which we’ve got very good understanding of, through careful planning and execution.

“Most recently, the bringing together of the PFS and the [Fortnum] business was executed extremely well. Yes, it’s different in terms of scale, but the principles of putting the adviser first, advisory business first, minimising the disruption in that transition was critical to that success and will be critical to this next one.”

Scale and capital

One of the driving factors for the deal, Younger explained, is the scale that the combined businesses can provide.

“One of the things we do, of course, is licensing, but we also do a host of other things to support those businesses. Scale is a really critical part of that, because you can invest, you can leverage that size,” he told ifa.

“The things that we want to achieve, which is, can we get a better outcome for clients through that scale, in terms of maybe how we interact with product manufacturers? And the second layer is, can we get a better use of the P&Ls of the practices when they have to buy in services and run that faster, better and cheaper?

“That was our strategy. So, this just gives us an accelerator, and that’s why it was a neat fit for AMP, because AMP was looking for that accelerator.”

AMP’s George added that not only is the “greater scale” that the deal with Entireti delivers important, the “capital requirements for succession and growth are pretty important as well”.

“We wanted to make sure that the advisers had access to capital, both for succession but also for growth opportunities,” she said.

“While we’ve been supporting that, to be able to have someone like AZ NGA with the backing behind them was really important.”

According to Lawler, the AMP Advice business posting losses had led to its advisers “questioning the sustainability of the business”.

“That worries them, they’re saying, ‘What happens if someone says we have a loss and the business folds?’ That is a concern. We’re a key partner and a supplier to them,” he said.

“This gives certainty about that and we move into a structure where we can be economically viable. That’s really important.”