In an update on its assets under management issued to the Australian Securities Exchange recently, AMP revealed that it had experienced record net outflows from its wealth management business. While the group struggles contain damage to its reputation, high noon was postponed for hundreds of AMP advisers, with the deadline it set for its “unprofitable” advisers to exit the organisation extended to November 29.
AMP saw record net outflows from its wealth management business in the third quarter - net cash outflows were $1.9bn in the three months to September 30, which was a 30 per cent increase year on year.
AMP said A$200m of the outflows came as the result of the government's new Protecting Your Super legislation, which led to the introduction of fee caps and the transfer of inactive low-balance accounts to the Australian Taxation Office.
The government’s legislation is aimed at reducing insurance and fee costs for low balance and in-active customers. AMP like other companies have had to transfer inactive low-balance accounts to the Australian Taxation Office and cancel insurance for inactive members.
In August, AMP posted its biggest half-year loss since its listing, and withheld dividend for the first time.
In total, AMP’s wealth arm had cash outflow of $9 billion during the September quarter, mostly due to loss of retail investors on AMP’s platforms. Cash inflow came in at $7.1 billion during the quarter, thanks in part to an increased inflow from its North investment platform. The outflows were blamed in part in the legislative change according to AMP’schief executive Francesco De Ferrari.
“Australian wealth management is taking significant steps to reinvent its business model, building a business around client needs,” said AMP chief executive Francesco De Ferrari. AMP is certainly playing its part in the reinvention of Australian wealth managements business model, with the its strategic restructure effecting hundreds of advisers. Many were told they had till October 31stto accept exit terms because AMP no longer believed would be an appropriate fit for their new business model.
AMP confirmed last Sunday that it had acquiesced to a request made by the AMP Financial Planners Association (Ampfpa) for an extension to this deadline, which has now been pushed back to November 29th. The extension was welcomed by The Australian Small Business and Family Enterprise Ombudsman Kate Carnell, who, said she was “very pleased” with the deadline extension. Ms Carnell said the ombudsman was working through a number of cases and complaints against AMP where advisers were treated “very poorly”.
Ampfpa boss Neil Macdonald argued that AMP advisers who were on notice were still awaiting key information ahead of making a decision, including accurate data on grandfathered products and commissions and negative equity on loans. He also confirmed the law firm selected by Ampfpa on behalf of its members, Corrs, has written to advisers who have expressed interest in the legal action. Macdonald said the law firm is confident it will be able to file an action against AMP in late November or early December. For its part, AMP has said a legal dispute was not the company’s preferred approach and it would “vigorously defend” any court action.
BOLR Group action may be counter productive
A potential class action by advisers against AMP BOLR changes has been mooted, but lawyer Dan Mackay has told Money Managementthat such action could be counterproductive. He said “In the battle to come, we don’t think individuals are ‘safer’ simply because there are a large number of them heading in one direction. In fact, grouping together and being ‘in the pack’ might prove to be counterproductive, even dangerous”.
Many of the adviser’s individual issues are often very different, and Mackay said some of them had stronger legal claims against AMP than others. Some advisers had received a termination letter, whereas others gave notice under BOLR prior to AMPs announced changes, while others still gave notice after the changes were announced.
It would seem that nothing it cut and dried in this brave new world of financial planning, and the scenario facing many advisers and AMP’s travails illustrate this better than most.