AMP NZ is betting its wealth management future on passive investments, technology and an acquisition strategy to boost the AdviceFirst group after a mooted takeover deal for its ASX-listed parent fell over last week.
US investment business Ares Management binned its A$6.3 billion bid for AMP last week, sending the share price of the embattled firm tumbling down 11 per cent to close at A$1.32 on Friday.
According to a release, Ares “continues to engage constructively” with the Australian financial services giant around its AMP Capital funds management unit.
However, the collapse of the A$1.85 per share Ares offer for the wider business leaves AMP on the hook for its struggling trans-Tasman wealth management units and the better-performing Australian bank.
“The review has confirmed AMP’s transformation strategy for the AMP Australia (Australian wealth management and AMP Bank) and New Zealand wealth management businesses is likely to be the optimal outcome for shareholders,” the release says.
Strategy documents released along with the group’s 2020 financial results on Thursday, show AMP plans to complete an “investment renovation” this year of the NZ wealth arm that will see most assets transferred to BlackRock index funds.
As well the AMP NZ 2021 plan includes a move to “leverage AdviceFirst leadership position through practice acquisitions”.
AMP purchased one new practice for the AdviceFirst franchise in 2020, the results show. However, total AMP advisers (covering employed and AdviceFirst) fell from 62 to 57 during the 2020 calendar year. AdviceFirst, which is understood to have recently bought another high-profile practice, currently boasts 34 advisers.
“As part of the AdviceFirst strategy to grow scale and reach, one advice business was acquired in FY20 while organic and net cashflows improved A$129m on FY19,” the AMP document says.
But the AMP NZ wealth unit suffered an almost 20 per cent declined in net profit last year to A$36 million compared to A$44 million the previous year. Wealth management (including KiwiSaver, superannuation and other funds) net profit slipped to A$23 million (A$26 million in 2019) while advice racked up gains of A$13 million, down from A$18 million in 2019.
The sluggish 2020 for AMP NZ saw total assets under management inch up by 1 per cent to almost A$12.4 billion, led mainly by its KiwiSaver scheme, which recorded net flows of A$229 million over the year. For the same period, though, net outflows from non-KiwiSaver AMP NZ investment products (superannuation and other funds) hit A$286 million – albeit an improvement on the A$543 million of outflows in this category in 2019.
While AMP faces challenges reinventing the NZ business – previously deemed a low-growth prospect and tagged for sale – those are dwarfed by issues mounting at its Australian wealth arm.
According to a Bloomberg report, Ares “abandoned its offer for the whole company partly because of concerns over the deteriorating performance of AMP’s wealth management business, according to people familiar with the matter”.
“Earnings at AMP’s Australian wealth unit plunged 44% last year after investors withdrew A$8.3 billion of funds…,” Bloomberg reported last week.
Beset by multiple regulatory and legal problems, huge fund outflows and a shrinking advice network, AMP plans to resurrect the Australian wealth business with a ‘simplification’ strategy, AMP chief, Francesco De Ferrari said.
Australian AMP advice practices fell by 37 per cent last year to 595 while underling adviser numbers dropped by a quarter to 1,573.
At the same time, the AMP chief said the group had “pivoted” the possibly still-for-sale funds management division to an “increasing focus on real assets”.
Under plans laid out in the strategy documents, the AMP Capital multi-asset group will move across to the AMP Australia division this year. AMP Capital would also lean more to closed-ended real asset-based funds, the document says.
Despite the ‘jewel-in-the-crown’ status of AMP Capital, total assets under management at the funds unit fell to just under A$189 billion at the end of 2020, compared to A$203 billion plus 12 months previously.
AMP Capital NZ reported net outflows of almost A$1.5 billion last year, according to the accounts, ending the period with total assets under management of about A$21.7 billion (A$22.5 billion in 2019).