What will be the future of AMP Limited’s financial planning business in the aftermath of any successful acquisition of the company by the current US private equity bid or by any another consortium?
That is the question being asked in the financial planning industry in circumstances where there is a consensus that AMP Capital and AMP’s North platform are regarded as the jewels in the crown while the financial planning business is looking somewhat tarnished by ongoing advice remediation and buyer of last resort (BOLR) issues, not least the class action mounted by AMP advisers.
According to senior planning industry executives, the key issue for those looking at the AMP financial planning businesses is the question of the indemnities necessary to cover the cost of remediation and any loss of the legal battle around the BOLR contracts.
When the company issued its first half results in August, it told the Australian Securities Exchange (ASX) that its client remediation was on track to be 80% complete by the end of the current financial year and fully complete next year. It said total program spend at that point had been $328 million with $64 million to paid in the first half of the current financial year.
Countplus chief executive, Matthew Rowe noted the significance of the Commonwealth Bank having provided indemnities with respect to his company’s acquisition of Count Financial.
He said the situation did not seem to be as clear-cut with respect to any acquisition of the AMP financial planning businesses.
“At a time of significant change in financial planning it is really a question of who represents the natural home for AMP financial planning businesses,” Rowe said.
The indemnities would be required for buyers of the licenses attaching to the AMP planning businesses – AMP Financial Planning, Hillross and Charter – with the anecdotal evidence around the sale of MLC Wealth to IOOF suggesting that there would be efforts by other licensees to recruit what they perceived to be the best financial planning practices.
Financial planning business broker, Paul Tynan, said he believed it was likely the US-based financial services house currently bidding for AMP, Ares, were more attracted by AMP Capital than the ‘retail’ financial planning elements of the business.
“I suspect they are only interested in the wholesale elements,” he said. “But there will be a real problem in separating the wholesale from the retail.”
Advice IQ managing director, Paul Harding-Davis said he had little doubt that those looking to bid for AMP Limited would see the value as being in AMP Capital, the North platform and perhaps AMP Bank.
“The advice business represents a challenge, although is not necessarily an insurmountable challenge,” he said.
Like Rowe, Harding-Davis said that at least a part of the challenge for anyone looking at the value of the advice business was the regulatory issues around client remediation together with the class action currently on foot.