The NZ regulator has singled AMP out for special attention as it scrambles to understand the impact of the ongoing Australian financial services Royal Commission (RC) this side of the ditch.
In a joint letter sent last week, the Financial Markets Authority (FMA) and the Reserve Bank of NZ (RBNZ) requested all local banks to provide evidence by May 18 that “misconduct of the type highlighted in Australia is not taking place here”.
However, AMP, which was accused of the most egregious legal breaches by the RC, was not cced on the FMA/RBNZ letter, which was signed by both FMA boss, Rob Everett, and new RBNZ governor, Adrian Orr.
“The FMA is engaging with AMP separately and is looking to hold meetings with insurance companies in the next few weeks,” a spokesperson for the regulator said.
Meanwhile, AMP rebutted some of the RC charges in a formal response posted last week.
“In particular, AMP strenuously denies the allegation by Counsel Assisting that it is open to find that it has committed a criminal offence in providing to ASIC in October 2017 a report prepared by Clayton Utz,” AMP says.
AMP holds its AGM this Thursday with the fate of its NZ operations (excluding AMP Capital) already on an agenda that may need some heavy editing. The original notice of meeting published earlier this year dwells much on the remuneration package of then-CEO, Craig Meller.
Meller left following the RC revelations last month – minus a bonus – along with AMP chair, Catherine Brenner, who stepped down at the end of April.
Mike Wilkins, former Tyndall and Promina (the now-defunct NZX/ASX-listed financial services conglomerate comprising Tyndall and Asteron et al), was since appointed interim CEO of the embattled AMP.
Last Friday evening AMP also named ex Commonwealth Bank of Australia (CBA) chief, David Murray, as the new independent chair.
In a statement, AMP said Murray, who will assume the role after the AGM, would “lead the redevelopment of governance processes at AMP”. His duties include refreshing the board and finding a new permanent CEO.
Murray led Australia’s largest bank from 1992-2005 as it transformed from a partly government-owned institution into a “modern, integrated financial services company”, the AMP statement says.
The AMP gig comes as the integrated ‘bancassurance’ financial services model Murray helped popularise continued to disintegrate across the Tasman. Last month the CBA, for example, confirmed it would list the Colonial First State Global Asset Management business it bought with such fanfare in 2000 under Murray’s watch.
CBA, too, was the subject of a critical, if stodgy, report published by the Australian Prudential Regulatory Authority (APRA) last week, that concluded: “’CBA’s continued financial success dulled the senses of the institution’, particularly in relation to the management of non-financial risks.”
APRA said it would seek “written assessments” from the country’s largest institutions that they had addressed issues identified in the CBA report.
Over the last year all of the big Australian banks – bar Westpac – have either divested, or announced plans to hock off, their insurance manufacturing arms and other ‘non core’ financial services units. The Australian-led disintegration has spilled over to NZ where, among other moves, CBA’s NZ subsidiary, ASB, sold its Sovereign insurance business to AIA as ANZ contemplated a similar sale.
And in another watershed moment last week, the National Australia Bank (NAB) said it would divest the mammoth diversified investment and advice arm, MLC, by the end of next year.
MLC is a multi-level beast comprising some of Australia’s largest investment and superannuation funds, platforms and ‘third-party’ advice brands.
Interestingly, NAB’s NZ child, BNZ, has recently returned to the fund-manufacturing fray.
Announcing the bank’s half-yearly net profit of $490 million last week, new CEO, Angie Mentis, said: “BNZ now has $5 billion in funds under management. BNZ is working hard to meet the wealth management needs of even more customers and is excited about the opportunity to do that by creating YouWealth, the bank’s newest wealth management offer.”
Among a shopping list of items, the FMA has asked NZ banks to supply any “specific plans and actions you have taken (or have underway) to respond to the issues and themes arising from the Royal Commission”.
The RC uncovered a number of deficiencies in both bank and non-bank financial product distribution arrangements in Australia with a focus on clients paying ‘fees for no service’. As well as the nature of obscure ‘buyer of last resort’ (BOLR – sounds like ‘bowler’) deals between financial advisers and institutions, the RC highlighted a range of industry practices including:
- executive and adviser remuneration deals such as key performance indicators and volume bonuses;
- how products are selected for financial advisory firm’s ‘approved product lists’;
- the role of investment platforms – including differential pricing for the same service; and,
- how the industry shares information about advisers who breach legal standards.
The FMA could not confirm whether banks would have to divulge that level of detail under its ‘please explain’ letter sent last week; nor whether it would make any detailed findings public.
“We intend to be fully open and transparent in our inquiries and interactions with you and we expect the same approach from your organisations,” the letter says.
Concurrently, the regulator is working on a number of big-ticket issues including: the upcoming financial adviser legislative reforms; “thematic work on incentives in vertically integrated institution”; and, a report on soft-dollar incentives in the insurance industry due out any day now.