On Thursday morning, AMP announced on the ASX that it has entered into a strategic partnership to offload the majority of its stake in three licensees and its Jigsaw offering, while also selling off its minority stakes in 16 advice practices.
Entireti, itself formed earlier this year through a merger between Fortnum Private Wealth and Professional Financial Services, will take control of the licensee side for $10.2 million, AZ NGA will acquire AMP’s advice practice holdings for $82.2 million.
Speaking with ifa, AMP chief executive Alexis George said the “world is changing, and we need to change as well”.
“AMP has been in the business for 175 years, and arguably started as an advice business of sorts, with tied agents through the life insurance business,” George said.
The CEO explained that there have been extensive consultations with AMP’s advisers and firms over the last 12 months, leading to the decision that it was no longer the right fit for either party.
“Advice is evolving and doesn’t naturally sit inside a listed or APRA regulated entity,” George said, adding that the structure of the deal means there will be “very little change” for advisers as they will remain under the same licensee.
“Clearly, the AMP practices, at a point, would need to rebrand, but most of them use their own name anyway, and we’ll support them with the cost of doing that.”
AMP Advice group executive Matt Lawler will move across to the joint venture entity – provisionally named NewCo – and take the CEO role.
Under the terms of the deal, Entireti will own 70 per cent of NewCo and AMP will have control of the remaining 30 per cent.
Lawler told ifa that “continuity of services” is an important factor for AMP’s advisers, highlighting the need to ensure that the transition is “seamless”.
“You don’t want this decision to create a whole lot of work for them, so the way it’s been structured is that there is no work for them,” he said.
“There are no decisions that they need to make. We’re actually lifting the licenses and bringing them across, that’s actually really important to them.”
According to Lawler, this is a move that advisers want to happen, noting that many of the details of the partnership originated through the adviser consultation process.
“The next evolution is for these businesses to be standalone and to be professional services businesses, not connected to product providers, which was the old model. I think advisers are actually looking forward to that,” he said.
George added that it is a positive step that “vertical integration is gone” from financial advice.
“I applaud that, to be honest,” she said.
“I think it’s important that that goes, and I think the need for advice continues to increase.”
Australia’s new largest licensee owner
In announcing the partnership, the firm’s noted that the combined entity would have in excess of 1,300 advisers under its banner, making it the new largest “financial advice business service provider”.
As things currently stand, the latest Wealth Data numbers show 826 advisers under AMP’s AFSLs and 362 across Entireti for a total of 1,188. Adding in the 126 advisers attached to Jigsaw, AMP’s self-licensing arm, puts the final figure at 1,314.
Speaking with ifa, Entireti managing director Neil Younger said the deal marked a “really significant day” in financial advice.
“We’re really excited to be part of what we think will be a really exciting next phase for both our business and for advice,” Younger said.
“It’s a big strategic decision for [AMP] to essentially move out of advice in the way that they’ve chosen to do. They wanted a partnership, they sought that in the market. We participated in a lot of conversations around how they could look and we identified the alignment with what we were trying to achieve.
“We didn’t just go out and searching for another 900–1,000 advisers, but that’s how many they’ve got. Together, we fulfil our ambition as a very large-scale advisory network.”
He added that while moving such a large number of advisers across was certainly a big task, Entireti isn’t daunted by the scale of the migration.
“We’re applying a lot of resources to this transition, along with AMP as well, to get all of that right.
“A number of the participants within the Entireti business, myself included, I come from a world of running very large businesses, so we’re not daunted by the scale, and we’ll handle the complexity, which we’ve got very good understanding of, through careful planning and execution.
“Most recently, the bringing together of the PFS and the [Fortnum] business was executed extremely well. Yes, it’s different in terms of scale, but the principles of putting the adviser first, advisory business first, minimising the disruption in that transition was critical to that success and will be critical to this next one.”
Scale and capital
One of the driving factors for the deal, Younger explained, is the scale that the combined businesses can provide.
“One of the things we do, of course, is licensing, but we also do a host of other things to support those businesses. Scale is a really critical part of that, because you can invest, you can leverage that size,” he told ifa.
“The things that we want to achieve, which is, can we get a better outcome for clients through that scale, in terms of maybe how we interact with product manufacturers? And the second layer is, can we get a better use of the P&Ls of the practices when they have to buy in services and run that faster, better and cheaper?
“That was our strategy. So, this just gives us an accelerator, and that’s why it was a neat fit for AMP, because AMP was looking for that accelerator.”
AMP’s George added that not only is the “greater scale” that the deal with Entireti delivers important, the “capital requirements for succession and growth are pretty important as well”.
“We wanted to make sure that the advisers had access to capital, both for succession but also for growth opportunities,” she said.
“While we’ve been supporting that, to be able to have someone like AZ NGA with the backing behind them was really important.”
According to Lawler, the AMP Advice business posting losses had led to its advisers “questioning the sustainability of the business”.
“That worries them, they’re saying, ‘What happens if someone says we have a loss and the business folds?’ That is a concern. We’re a key partner and a supplier to them,” he said.
“This gives certainty about that and we move into a structure where we can be economically viable. That’s really important.”
AMP has been a masterclass in value destruction.
So this leaves AMP with what ?
My lived experience was that AMP was run worse that a badly run Government department.
The left hand never knew what the right hand was doing.
Middle management doing not very much.
Excursions into employed planner channels, spending huge amounts of money and then scrapping the channel.
Shocking story all round.
The saddest thing about AMP is the advisers who remained with them after how they treated our colleages. I have NOTHING to do with them, never have had, never will have. But am ashamed of advisers who stuck with them.
“the world is changing” is techie talk for management (or should I say mismanagement) has trashed the brand so badly it will never recover. After a 15 year stint at Ipac & Genesys I can see why. Just lurching from one disaster to another.
You must now start to question the long term viability of AMP
A sensible move to retain a 30% interest however you now rely on the bank and investment platforms for profits
The issue is the strategic plan of growing the bank hasn’t really got off the ground yet so will take 12 to 18 months to implement IF you have the right capability in place
I really do have some concerns for how the organisation intends to grow the investment platforms or even retain existing share FUM when all the advisers will be moving over to a different licensee and have greater choice of platform provider
Coupled with the fact that platform fees will be squeezed further over the next 12-18 months as new AI technology is introduced and providers cut platform costs to stay competitive the only way to retain the brand presence and profits is diversification into other revenue streams and areas e.g., using their existing client base to leverage new sources of revenue streams
Good news for AMP advisers, not so good for the Fortnum cohort.
AMP will drag this boutique business to the gutter!
Circa 1994 for a brief moment the AMP share price hit $40.00.
Today the price is $1.28 and has been as low as 0.84 cents in the last twelve months.
The reduction in shareholder capital of 97% is directly corelated to management’s competence or lack thereof during the last 30 years.
totally agree, it has been a disaster, i did 17yrs in this haunted house.
Worth more as a capital loss than the capital. Funny, you do understand where the FUM went right?
Nov 1997 is their listing date and cost base is $10.97 for CGT.
Leaves AMP with what? A sub scale bank that isn’t really competition for the real banks and an investment platform that has worse service than all of its competitors. Shame they couldn’t have exited advice prior to the destruction of numerous advisers mental health but if it is one step closer to AMP going the way of OneTel then it is a positive.
The notion that “the world is changing” in the context of AMP’s decision to exit the financial advice sector is more of a corporate narrative than a reflection of any fundamental shift in business principles. The reality is that businesses, including AMP, have always operated under the need to generate profits commensurate with the risks to which they expose shareholder capital. When AMP says it is “changing,” it’s more accurate to say that it is “admitting defeat” in this particular sector.
AMP’s inability to turn a profit from its financial advice arm, despite having nearly 1,000 advisers, is a clear indication of its inability to solve for profitability. Sustaining a $47 million annual loss is untenable, and this move is a response to that financial reality rather than an adaptation to a changing world.
The broader issue in the financial advice sector is that licensees have yet to crack the code on how to run these operations profitably without significant subsidies, from banks now long gone, or products. Bloated compliance departments contribute significantly to this profitability crisis. Without a leaner, more efficient model, profitability remains out of reach for most in the industry. This isn’t a new challenge—it’s a longstanding one that AMP has ultimately decided it cannot overcome. Good luck to AZNGA, let’s hope they figure it out.
So when Alexis said that AMP was committed to the advice business, is this what she meant?
Vertical integration in advice is very much alive and well within the Industry Super Funds Alexis.
If you take the percentage of Australians who are members of these vertically integrated models, it adds up to a large component of biased advice being delivered to individuals who believe their super fund is acting in their best interest when in reality, the super fund is acting in their own best interest every single time because their determination to retain FUM or their never ending drive to attract new FUM and to openly encourage members to rollover other super fund accounts into theirs is clear evidence of their priority.
Long overdue however one should now consider the impact it will have across AMP with potentially hind-reds of redundancies ask Mrs George how many people will be impacted ?
They’ve included a provision for $30 million for “separation and transition costs” so assuming an average redundancy of say $150k maybe around 200 staff will be exit prior to separation?
What will the redundancies be for those AMP employees moving to NewCo? 104 weeks max? Doubt it.