More than 400 advisers left AMP in 2019, contributing to a $2.5 billion loss for the troubled wealth manager as it vowed to “vigorously defend” any legal action as a result of changing the terms of its buyer of last resort (BOLR) agreements.
Announcing its 2019 full-year results on Thursday, AMP chief executive Francesco De Ferrari said the year had been one of “fundamental reset” for AMP, while conceding that the exodus of advisers from the business and from the financial advice industry as a whole was “a big social problem”.
“We have taken bold yet necessary action to address legacy issues and de-risk the business. We have a clear roadmap for execution of our strategy and our focus is now on delivering,” Mr De Ferrari said.
The wealth manager attributed the lion’s share of its $2.5 billion loss for the 2019 year to further large provisions made for its advice remediation program, having agreed a further remediation policy with ASIC to cover advisers no longer active in its network.
Despite a 9 per cent increase in assets under management in its wealth management business to $134.5 billion, and a $9.7 billion jump in flows to its North platform, net cash flows for the year decreased by $6.3 billion, which AMP said reflected “ongoing reputational impact and strong competition”.
Mr De Ferrari said the exodus of 440 advisers over 2019 had been largely as a result of management action, following the controversial decision last year to lower the multiple of existing BOLR arrangements with advisers to 2.5 times revenue.
However, he said he did not expect a great number of additional adviser exits and that the company was ready to defend any legal action taken by affected advisers.
“We acknowledge that this is a significant disruption and it is not easy for any of the actors involved, so we are working closely with advisers to support them and we are mindful of the impact this has on clients,” Mr De Ferrari said.
“At this stage, the vast majority of advisers have made decisions about their pathway forward. We believe we were within our rights to reset the commercial terms and we will vigorously defend any type of action we get.”
He added that the business was focused on “professional, productive and compliant” advisers as it sought to reset its wealth management business for the future, but that the number of advisers exiting the industry remained an ongoing problem that would affect the accessibility of advice for consumers.
“I think this wider disruption is going to play out for the industry as a whole, we will see the number of advisers go down so it leaves me worried in terms of affordability of advice. We are heading for low rates, a lot of Australians are heading for retirement and with a lot of advisers leaving this industry, this is a big social problem that we need to start facing into,” Mr De Ferrari said.
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