In the Judaeo-Christian scriptures, the Book of Exodus follows the Book of Genesis. The more contemporary story of the Genesys Wealth Advisers dealer group may ultimately lead to a similar phenomenon.
While AMP’s decision to close the licensee may not be quite of Biblical proportions, there is little doubt that the impact of the news – first broken by ifa – was felt across the financial services industry.
Most of the 200-odd Genesys ‘member firms’ came to AMP via a circuitous route. In 2004, Challenger acquired Genesys predecessor Associated Planners (AP), in a move former AP shareholder and practice principal and current Fortnum boss Ray Miles said “destroyed a great brand and culture”.
It was in that deal – spurred by Challenger’s then-CEO Chris Cuffe’s desire to gain a larger footprint in the “growing professional advice” market, according to investor documents – that many of the current day Genesys member firms first entered the world of vertically integrated wealth management, largely against their will.
Challenger subsequently merged AP with its existing Garrisons dealer group and rebranded the lot as Genesys Wealth Advisers, before on-selling it to AXA as part of a multi-million dollar “asset swap”.
A number of Genesys firms speak of their years within the AXA stable quite fondly, referencing relatively high levels of product recommendation and business strategy freedom.
However, they say that all came to a halt when AXA merged with financial planning giant AMP in 2011, which resulted in the once vehemently non-aligned AP advisers joining Australia’s largest institutional advice network.
As one AMP insider puts it, the Genesys member firms therefore were “accidental AMP planners”, which perhaps explains how acrimonious the relationship became.
ifa first reported rumblings of trouble within Genesys in September 2014 after AMP cancelled the Genesys leader’s conference scheduled to take place in Geneva, Switzerland, which one former AMP executive described as “not a good look”.
The member firms were locked in serious negotiations with the parent company, ifa was told, listing bug bears such as “restrictive APLs” and prohibitive software/platform choices, with some threatening to leave the group.
AMP ultimately responded with the decisiveness you would expect of a major listed organisation.
On 18 November, AMP announced it will “rationalise” – ie. shut down – the Genesys business, offering the member firms an ultimatum: transition to another AMP dealer group (one where there are fewer troubles and we maintain greater control) or leave. In other words, ‘you are either with us or against us’.
However, ifa also learned that an incentive was in place – which leaked documents subsequently confirmed – in which those moving to other AMP groups would be paid “three times conflicted rem” as a sweetener.
Many Genesys member firms have not yet made up their minds about the future, with a number weighing the lucrative incentive against their desire for independence. The internal AMP document suggests the company expects some to go and others to stay within the network.
However, this story’s significance lies not so much in what it says about internal AMP politics as in its reflectiveness of a broader emerging trend.
ifa understands that similar tensions are currently brewing in some of AMP’s rival institutions, not just between practices and dealer group executives, but between those executives and their ultimate masters.
The collapse of Genesys is reflective of the increasing strain facing the entire authorised representative model.
Following the CBA scandal, practice principals largely take the “flight to safety” argument with a grain of salt and are no longer willing to forgo so much control on crucial areas of their business decision-making.
On the other hand, institutions are understandably worried about how to make a buck out of dealer groups – many of which came with price tags of upwards of $100 million – in a climate heading towards product agnosticism and independent advice provision.
The decision facing the Genesys member firms may ultimately be a turning point not only for the advice market, but for its public standing.
But even if they all accept the cheques being dangled, it is likely it is not the only insto dealer group headed for demise.
The times they are a changing. The non-aligned market is set for a resurgence.
Product distribution models are now based on regulation under pressure to continue.