EXCLUSIVE AMP’s new advice executive has explained his position on BOLR, practice values, and the impact of the group’s decision on advisers facing a negative equity dilemma.
In an exclusive interview with ifa, AMP group executive of advice Alex Wade answered the tough questions many advisers would like to know the answers to.
The group is undergoing an extensive overhaul of its advice business, with some practices staying with the group and others being let go. What was it about those that have received termination letters that made AMP decide they should no longer be part of the group?
“It’s really about having sustainable businesses for the future,” Mr Wade told ifa. “There may be some that are not quite profitable today but with a few tweaks would be very profitable. There are some who may be a one-man band that may be very strong in its existing capability with an existing adviser, but then how sustainable is that for the long term? I’m not sure.”
“For us it is about looking at each adviser, each practice, how they sit and where they could benefit – for them and their clients. It is about identifying the best need for the adviser and their client. That may see a lot of mergers. It is about looking at each individual practice and seeing if they are sustainable, whether we can help them be sustainable.
“Obviously, there are a lot of disruptive changes to the industry. Grandfathered commissions and those sorts of things that are impacting the economics. But realistically we are trying to retain the best advisers in the best way for their clients that creates a sustainable business for the future.”
Mr Wade is part of AMP’s new leadership team, which includes his former Credit Suisse colleague and AMP CEO Francesco De Ferrari. When the new management announced changes to buyer of last resort (BOLR) arrangements in early August, many AMP advisers found themselves in a difficult financial position. Some are effectively in negative equity, owing more to AMP Bank than their business is now worth.
But those outside the network knew AMP advisers had a good thing going; the four times revenue promise was unheard of anywhere else in the industry. Did Mr Wade and the new leadership team think these high valuations should never have been made in the first place?
“I have personal views on some of the decisions that we inherited,” Mr Wade said. “But honestly, we are just focusing on going forward. That’s why you saw that huge write-off number. We came in, there were some things that we needed to deal with around legacy and we wrote it off. I think the feedback and support from investors was strong. The revalue of BOLR was part of that, to realign those businesses to market value.”
Given that many advisers took out loans from AMP Bank under the expectation that their businesses would be valued at four times, should the bank not meet them in the middle and adjust the loan balances accordingly? After all, it was AMP that devalued the book – not the adviser.
Mr Wade said the group is having individual discussions with each practice about this issue.
“There is no one-size-fits-all approach,” he said. “It differs by practices, which is why it is a pretty big task.”
The AMP Financial Planners Association this week announced that it has stepped up its action against the company. The association has surveyed member practices about the action they want to take and received a response rate of over 90 per cent. Of those who responded, over 93 per cent indicated they support legal action. They are now effectively preparing for a class action.
Ampfpa CEO Neil Macdonald said his members intend to hold AMP accountable for the severe financial, reputational and psychological harm it is inflicting on its own advisers.
“I can fully empathise,” Mr Wade said when asked how he felt about the impact that BOLR changes have had on advisers.
“You had an expectation of something that has changed. The challenge with that is that it is unfortunate that the industry has changed. It is a reality of the circumstance, but I can empathise that some people didn’t think it would happen so fast or would happen differently.
“I have a lot of empathy for what everyone is going through in the industry. What I can emphasise is that we are trying to support our partners through this in whatever outcome that may be, whether that is a stay outcome or a leave outcome.
“We haven’t done what others have done and just dropped them. That’s not our approach. We have been very cognisant of supporting these people. This has been a partnership for a long time with a lot of people. I’m very aware of that. We are trying to manage through that in the best way for everyone involved.”
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