AMP Financial Planning’s announcement last week that it is to review the way it re-wards its top business writers is in many ways a watershed for the financial planning industry.
AMP Financial Planning’s announcement last week that it is to review the way it re-wards its top business writers is in many ways a watershed for the financial planning industry.
AMP is widely recognised as one of the pioneers of financial planning in Australia. The group has been a key player in financial planning’s evolution from a life insur-ance based sales function to a fully fledged advice service covering the full spectrum of financial services.
It is not only the most established group in Australia but also the largest dealer group in the country with more than 1200 advisers, many of whom have been with AMP for most of their working lives.
One of the legacies of being at the forefront in the industry is that the deeply en-trenched cultural identity is often difficult to shift to meet changing market condi-tions. This is especially true when some of AMP’s most valuable people have been loyal to the group for more than 40 years.
AMP executives have often spoken of their pride in the sales culture of AMPFP. And with good reason. The group wrote more than $4 billion in new business last year — streets ahead of any of its rival dealer groups.
However, AMP executives are also mindful of the need to respond to changing mar-ket conditions. In the past three years, executives such as AMPFP chief Steve Hel-mich and incoming AMP Financial Services boss Andrew Mohl have battled tire-lessly to ensure advisers are not just bringing in new business but they are also pro-viding clients with the best possible advice for their future financial health. As a measure of the success of these efforts, AMPFP will soon have the highest proportion of Certified Financial Planners (CFPs) of any dealer group, with more than half ex-pected to qualify by the end of next year.
Last week’s announcement by Mohl that the group will seek to reward advisers not just by the amount of new business they bring in but also based on their contribution to net cashflow is a quantum leap for the business. It is a recognition that AMP is now a listed company and shareholder value is now the dominant force within the busi-ness. Increasing funds under management has been slated as one of the key planks to build AMP’s profitability and resurrect its share price. Advisers will be rewarded for their ability to maintain funds under administration by providing ongoing service to clients.
It is a clear indication of the way the industry is headed. At the moment, many dealer groups are barely scraping a profit and only a handful are making a windfall.
This is fine for a fledgling industry with big prospects for the future. But as the in-dustry matures, pressure will mount on dealer principals to rein in costs and concen-trate on those areas where the best profit margins sit.
Those dealer groups that fail to take these changes on board will eventually see the errors of their ways when it comes to selling their businesses. And those advisers that fail to accept the need for change may find the big bonuses of the past may soon dry up.
