In a research report on AMP, Morningstar analyst Chanaka Gunasekera warned that AMP’s ambitious strategy to revamp its damaged wealth business carries significant risks, particularly after the group’s reputation was tarnished by the Hayne royal commission.
While the analyst praised AMP’s ambitions to transform its advice business from a product-led distribution business to a holistic advice-led business focused on clients, he warned that the strategy won’t be an easy one to execute.
“Being advice-led means tailoring solutions to a client’s problem, not selling a client a product. Being holistic means providing whole of wealth solutions, not just the most suitable superannuation or investment product,” Mr Gunasekera said.
“For the average Australian, superannuation is not their largest asset, most of an average Australian’s wealth is from bricks and mortar assets including their homes. The most important advice for these customers is how to deal with their mortgage.”
AMP’s broader transformation strategy looks to more closely integrate AMP Bank and its Australian wealth management business and provide cross-selling opportunities.
However, Morningstar warned that the major banks have also tried a similar strategy and failed.
Cross-selling, or ‘share of wallet’, was an important strategy for the big four banks when it came to retaining customers. However, the practice of selling more than one product to consumers has been less successful than many believe. Cross-selling was also heavily criticised by the Hayne royal commission.
A 2018 report into the practice of cross-selling by Roy Morgan found that most major banks have seen their ‘share of customer wallet’ declining over the past four years, with NAB slipping 3.7 percentage points to 29.5 per cent, CBA losing 2.6 percentage points to sit at 31 per cent share of wallet, ANZ Group sliding 1.1 percentage points to 27.7 per cent and Westpac down 0.9 percentage points to 28.3 per cent.
“While there is no doubt the royal commission has exposed serious problems in the selling practices of banks, the share of wallet trend highlights increased competition across a number of product categories, with the Reserve Bank recently noting that overseas bank offerings, especially from Asian banks, plus the rise of ‘fintech’ operators, is continuing this trend,” the report noted.
However, the big-four banks have managed to maintain a larger share of their customers’ total number of financial products. CBA on average provides three out of 8.2 products held by each customer; ANZ provides 2.8 out of 9.6 products; NAB provides 2.7 out of 9.8; and Westpac provides three out of 9.6.
The Big 4 and Suncorp did not do well in comparison to their banking efforts in advice (ie) realistically they failed. AMP are considerably more inefficient than the banks and their banking knowledge is exceptionally poor (ie) there is no reason to think they will be successful. Don Argus mentioned in about 1993 that one company he was scared of if they could get their act together was AMP — luckily for everyone else they are no closer to getting their act together now than they were in the early 1990’s. The other company he mentioned was GE, which also shows that 27 years is a long time.
Debt and mortgage management is just one component of a decent financial strategy/plan along with cash flow management, tax planning, super strategies, income streams, Centrelink/Vet Affairs, personal risk management, estate planning, retirement, investment, age care, salary packaging….blah…blah…blah. Analysts have no idea nor does ASIC for that matter.
Cancel the mortgage broker commissions, & then watch the new loan business collapse like the car finance sector. This country has totally lost the plot, no thanks to Haynes & his Union Super fund friends.
mortgages should become a financial product. only a licensed financial planner should advise on it. in Sydney and Melbourne ordinary Australians are committing up to 50% of their monthly income towards it with no plan whatsoever – other than a wing and a prayer – to paying it off before they retire.
these ordinary Australians are aggressively marketed to by property spruikers with “property doubles every 7 years” and it’s a “no brainer” to the tune of 1 in 5 Australian with a mortgage now suffers from mortgage stress, a third aged 65 entering retirement have debt on their main residence.
regulate mortgages now!
Mortgages are a ticking time bomb, as many ppl will need to access their super to repay debt, resulting in less super, and more on the age pension.
The key to holistic advice is providing life-centred planning, not more product distribution