Following news on Friday that the wealth giant’s advice revenue has dropped by 60 per cent since announcing a revamp of its advice model, Allan Gray CIO Simon Mawhinney said the changes currently taking place are “critical”.
“I think the wealth management business might die,” Mr Mawhinney told ifa.
“Revenues are falling, yes; part of that is product simplification and part of that is moving towards very contemporary offerings that are very competitive on the market.
“There is a lot of fee pressure and I suspect they’ve confirmed we haven’t seen the full extent of that yet.”
In its half-year results presentation on Thursday, AMP said its “advice reshape” program launched under previous chief executive Francesco De Ferrari was 95 per cent complete and pointed to increased practice productivity and scale as a key metric of success for the transformation strategy, with average adviser numbers per practice having increased from 2.4 in 2019 to 3.3 in 2021, and just 34 per cent of practices now one-man bands compared to 54 per cent in the first half of 2019.
Mr Mawhinney said he expects more “revenue pressure” over the next few years.
“It’s not clear that the underlying profits ultimately in wealth management couldn’t be sustained, but it is important they address that cost base,” he said.
It comes weeks after AMP’s head of advice, Matt Lawler, refused to speculate about how many advisers will opt to exit the company by year’s end.
Advisers – some of whom were terminated in 2019 – have until 31 December to make the decision to exit alongside the cessation of client register buy-back arrangements as part of the advice model changes.
“We’re not going to talk about numbers, because obviously that’s going to play itself out,” Mr Lawler told ifa last month.
“But we have a team that specialises in mergers and acquisitions and supports our advisers. We expect a lot of these businesses will be picked up.”
The wealth management business will die and AMP capital will be taken over by someone with ethics. The bank is a joke and they couldn’t make money out of insurance. Despite all of the above Allan Gray still hold them? It’s why I no longer recommend Allan Gray to clients.
Agree with your comments except that the remaining planners will not save amp. They have only stayed as they were unable to exit for various reasons. Do not forget the remaining planners were also betrayed by amp and they are simply biding their time to either exit on reasonable terms or get even. AMP, and Allan Gray are in dreamland if they think the remaining advisers will benefit AMP.
Allan Gray defending it’s bullish buy of AMP shares. AMP not only an executive career destroyer, wealth destroyer of its planners, wealth destroyer of its direct investors, also a destroyer of great fund managers!
The one thing that could have saved AMP would have been a diligent and motivated adviser force. Unfortunately, AMP decided that they would just betray the advisers for reasons that make no sense. The true cost of this mistake is yet to be seen but you don’t need to be Einstien to know that betraying your distribution network isn’t going to be good for business. The few advisers that are left won’t be enough to turn around the outflow resulting in a much smaller business in the future.
Agree with your comments except that the remaining planners will not save amp. They have only stayed as they were unable to exit for various reasons. Do not forget the remaining planners were also betrayed by amp and they are simply biding their time to either exit on reasonable terms or get even. AMP, and Allan Gray are in dreamland if they think the remaining advisers will benefit AMP.
I don’t know that they betrayed the advisers. Where they were at fault is that they should have been tougher on the sort of practices they had and started to rationalise the network years ago. They did some excellent things to help people become advisers e.g. the AMP “university” and some have gone on to be build very good, even excellent, medium to large practices and attractive not only to stay at AMP but also to other quality licensees. The world changed around them and AMP had far too many tiny practices, mostly one man bands, whose revenue was far too low to invest in themselves and align to the new environment. So to my first comment they didn’t betray advisers they weren’t hard enough on them help them evolve. Evolve more than likely meant joining a quality bigger practice. AMP should have culled their advisers years and stopped recruiting / starting one man bands. They should also have gotten rid of some of their old traditional senior management well before the Royal Commission exposed their failings.
Small practices are perfectly viable if self licensed. They aren’t viable to a dealer group, because licensee risk and complexity increases exponentially with every CAR.
This view that advice practices must have scale to survive is a dealer group myth. Scale is only necessary to survive [i]within[/i] a dealer group. Small practices need to leave their dealer group and embrace the simplicity, independence, and lower costs of being self licensed.
I would not be talking up AMP’s M&A team. They are more of a handbrake on activity than a support to practices who have been doing deals for years without the need of interference from AMP.
Some of the most incompetent people I have ever met, really. Virtually none had ever been an adviser or owned a practice, though that could be said for virtually everyone in AMP from BDMs up. Good riddance to the lot.
Agreed, the M&A team have absolutely no idea. If AMP wants to save more money they could let the whole M&A team go and practices would find the whole process a lot easier.