InFocus: AMP and FinWiz announcements create new challenges

The Australian financial planning industry as we knew it in 2018 will never be the same again.

All of the major banks have either departed wealth management or are in the process of doing so while the AMP Limited adviser workforce and the arrangements under which they work will look very different as the company moves to implement its new strategy.

The question which should now be being asked in the financial planning industry is how it will accommodate the scores of financial advisers who will be searching for new licensees in the wake of the changes which have been announced by AMP Limited and the Commonwealth Bank. The numbers who will be looking over the next 12 months will be unprecedented.

AMP Limited did not immediately specify how many advisers were likely to exit its businesses, but some key hints were given with statements such as the company having “fewer, more productive” advisers and with the somewhat blunt message that “less than 20 per cent of adviser practices account for around 60 per cent of revenue and assets under management”.

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These statements gave solidity to the rumours which had been swirling in the market that AMP was going to jettison those elements of its adviser workforce which it saw as low-value while focusing on the high-value businesses.

Just as importantly for those advisers exiting the business, the company’s statements to the Australian Securities Exchange (ASX) made clear it recognised that buyer of last resort (BOLR) arrangements represented a liability for the company and would have to be changed.

Thus, last week’s announcement by AMP talking about a “reset of commercial terms” entailing resetting client register buy-back valuations to market-based multiples and redesigning the licensee offer to rebalance risk and return.

Importantly, its briefing materials revealed that it had estimated that the cost of doing this would be around $550 million to cover retention and support and to register acquisitions.

AMP also signalled an “increasing focus on direct to client channels” including via digital fulfilment, employed advisers, aligned advisers and external advisers who were using AMP’s MyNorth platform.

Its briefing documents pointed to the company scaling up its employed adviser channel and increasing adviser productivity, while aligned advisers became a smaller, more productive and higher quality network.

The bottom line of the AMP strategy is that a large number of advisers working in aligned practices appear likely to need to find new licensees to work under and it will be easier for some than others, in circumstances where the company has already nominated those which it believed were most productive and best of breed.

Money Management canvassed the views of a number of licensees on their appetite for absorbing former AMP aligned advisers, with the responses being cautious with many noting the number of Financial Wisdom advisers who would also be looking for a home.

One of the key areas of concern noted by the licensees was the level of due diligence required in bringing new advisers aboard because of the level of scrutiny on the part of the Australian Securities and Investments Commission.

They also noted that AMP advisers affected by the company’s strategic change would also be impacted by their obligations to meeting the new Financial Adviser Standards and Ethics Authority (FASEA) regime exam obligations, something which was likely to complicate the issue.

They said those who had passed the FASEA exam would clearly be more attractive than those who had not.