AMP is looking to reboot its troublesome Australian financial advisory business, revealing a series of reforms last week that remove long-standing institutional ownership shackles while ditching the controversial buyer-of-last-resort (BOLR) program.
In a statement to the ASX, recently appointed AMP Australia managing director advice, Matthew Lawler, said the updated advisory model for the group features a new service and fee schedule, ceding corporate claims to ‘owning’ underlying clients and the end of BOLR.
The once-dominant AMP Australian financial advice network – numbering close to 3,000 advisers at its peak – has been in crisis since the 2018/19 Royal Commission in financial services found the group rife with conflict, unjustified fees and administration issues.
During the Royal Commission, the AMP BOLR arrangements – that feature a guaranteed buy-out multiple for adviser businesses, often based on the use of in-house products – were also flagged as conflicted. Last year the former AMP chief, Francesco De Ferrari, introduced sweeping unilateral changes to the BOLR deals that significantly reduced payouts to advisers exercising the option.
But AMP has always maintained control of end-clients through tight legal contracts with advisers, rigorously enforced over many years in countless lawyered-up disputes.
Under the revised conditions, due to take effect in January next year, AMP Financial Planning advisers will be free to “transfer clients out of the AMP network” if they choose to leave the licensee, the statement says.
“The new model releases institutional ownership,” Lawler said. “Buyback arrangements will also cease, with advisers having between now and the end of the year to make the decision to leave the network under their existing arrangements.”
As at the end of last year, AMP Australia reported about 1,600 advisers in total under its various advice brands, down from 2,180 at the same time in 2019. However, the flagship AMP Financial Planning group sank from almost 1,150 advisers in December 2019 to 811 just 12 months later.
AMP says “further advice practice exits are anticipated before the conclusion of the buy back arrangements”.
According to Lawler, AMP would continue as a services-based licensee, providing advisers with resources and technology to help deliver advice and grow their businesses.
“Importantly these changes recognise that the financial advisers should be in control of their business,” he said in the release. “It is their business, it is their clients and with our support we are determined to be working with our financial advisers long into the future.”
Lawler was appointed to the key AMP advice role this July following a three-year stint as chief of boutique advisory firm, Wealth Market. The Australian financial services veteran has also held senior roles in the industry dating back to a seven-year career starting in 2003 with MLC (then owned by the National Australia Bank) that included leading the group’s advisory arm.
According an AMP spokesperson, the “new advice service model is for the AMP Australia business only, so no change in New Zealand”.
“The advice business in NZ continues to be led by Blair Vernon and his team,” the spokesperson said.
While AMP NZ previously had formal relationships with over 400 advisers – including the now-defunct Quality Advice Network – the group slimmed down considerably ahead of the new Financial Services Legislation Amendment Act licensing regime implemented this year.
AMP currently lists just under 50 advisers under its two financial advice provider (FAP) licences, comprising six employed under its home-brand option and 42 in the AdviceFirst network.
Founded in 2008, AdviceFirst initially featured shared ownership between most advisers and AMP. However, AMP now holds over 95 per cent of AdviceFirst shares.
The Australian advice reforms coincide with other major changes at the 170-year-old company including the impending break-up of AMP Capital into a to-be-spun-off private markets arm and the sale of its public equities and fixed income business to Macquarie.
The group claimed victory in one long-running regulatory Royal Commission-related battle in the middle of July after the Australian Securities and Investments Commission (ASIC) dropped criminal charges centred around the BOLR arrangements.
However, the regulatory relief has been short-lived with ASIC serving six AMP companies – including its advice groups – last week with new ‘fee-for-no-service’ charges on corporate superannuation products.
Incoming AMP chief, former ANZ Australia deputy chief, is due to formally begin her tenure this week.
AMP shares closed at about $1.04 last Friday, an historical low.