AMP chief executive Alexis George and advice executive Matt Lawler have detailed to Money Management how its exit from advice will change the industry, Lawler’s new role, and how the deal could see advice potentially make a short-term profit.
Earlier today (8 August), the firm announced it will sell its licensee and self-licensed offering Jigsaw to Entireti. Secondly, it sold its minority stake in 16 advice practices to AZ NGA. The firm has been offering financial advice in some form for 175 years.
She said: “It’s a big decision for AMP, it’s a big decision for the industry and will change the shape of the industry, but we believe it’s the right thing to do for our advice industry and the people in it and our shareholders. Things are changing and evolving.”
The firm previously detailed how it was assessing alternative options for the business after struggling to reach breakeven in advice. Advice losses have been improving; in the first half of 2024 it saw a loss of $15 million compared to $22 million in the previous half, and $25 million a year ago.
George agreed that advice losses have improved since the appointment of Lawler in July 2021 but, as an ASX-listed and APRA-regulated business, it was unlikely to reach the breakeven that it so desired.
Group executive of advice Lawler said: “One option was to continue, but we were never going to get to breakeven under the current structure. Another was to go it alone, but we saw the benefit in combining forces to create something new and powerful that changes the landscape.”
The first deal with Entireti is for $10.2 million, 70 per cent in cash and 30 per cent in equity, and the second with AZ NGA is for $82.2 million. Reflecting on the disparity between the two sums, George said this was based on the two valuations of the different businesses.
“Our licensee business, as we sit today, we would probably lose $40 million or so, and a company losing that much money typically isn’t worth a lot, so the $10 million headline figure, 70 per cent is in cash and 30 per cent is in equity.
“Whereas the equity stakeholder is a blueprint valuation of the underlying businesses.
“We felt we weren’t the right owner for those businesses. It’s a good time for advice so some of those businesses are looking to grow and need capital for that, so we wanted to find a big player who could really put ample capital behind them for growth and succession opportunities.”
Under the new structure, AMP’s joint venture entity will be called NewCo, and Lawler will be the inaugural CEO of this, employed by Entireti rather than AMP. He is hopeful that the new structure will allow the area to achieve profitability.
He said: “When you combine the two back offices, we will have more scale than anyone else in the market which gives us more negotiating power and the ability to bring new services to the market. There’s a whole lot of costs that will drop off [under the new structure], and we will be using that to achieve breakeven and possibly make a profit in the short term.”
While AMP will have a 30 per cent stake in the NewCo – which will be rebranded in due course – in order to maintain stability, its main focus following the exit of advice will now be on the wealth space, its North platform, bank and default superannuation.
Shame about all the lives ruined by Alexis George and her predecessors leading up to this decision, which just confirms the inadequacy of AMP to run a decent business. Now that they have a poorly performing investment platform and one of the worst banks in Australia hopefully Ms George will reduce her remuneration package to something appropriate.