AMP posts $2.5 billion loss after scandals exposed in royal commission
The chief executive at the notorious wealth manager could pocket a bonus of up to $1.8 million as it reports an eye-watering net loss.
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Beleaguered wealth manager AMP announced it will give its chief executive a bonus of up to $1.8 million on the same day it revealed an annual net loss of nearly $2.5 billion.
Francesco De Ferrari has been given the unenviable task of turning the once mighty financial institution around following the scandals exposed during the Kenneth Hayne royal commission.
AMP’s fees-for-no-service issue was arguably the most abhorrent of the misdeeds brought to light during the financial services inquiry, and investors have since ditched the company in droves.
But the chief executive, whose potential bonus was lifted from 120 per cent to 200 per cent of his base salary of $2.2 million, insists he won’t pocket the extra kitty unless he delivers on an ambitious plan to restore the company.
The move is likely to compound frustration for shareholders who have watched as their investment in AMP crumbled over the last three years, Bell Direct market analyst Jessica Amir said.
“Investors will be angry that the CEO’s potential bonus entitlement surged 80 per cent particularly at a time when it declared a massive write down,” she told news.com.au.
“But I think the smarter investors have been investing in companies that have steady or growing earnings instead, which explains why we are seeing other financials be bought up, such as Macquarie, Suncorp and CBA.”
AMP’s results reveal customers withdrew a staggering $6.3 billion out of the business while its earnings were even worse than analysts at Morgan Stanley had forecast in a year Mr De Ferrari described as a “fundamental reset” for the company.
“In a period of unprecedented legislative and regulatory pressure we have established a strong three-year road map for recovery,” he said in a statement to the ASX. “Our focus is now on delivery.”
The chief executive admits the volume of customers abandoning it wasn’t ideal as more than two-thirds was shed from AMP’s share price since 2018.
“The royal commission obviously had a reputational impact on AMP and is disrupting the whole industry,” he said.
During the royal commission, the then group executive for advice at the wealth manager Jack Regan admitted the company made untrue and misleading statements to the regulator about fees-for-no-service.
The inquiry heard AMP made a deliberate decision to continue charging fees to a group of “orphan” clients for three months when they went into a central pool, despite them receiving no advice services and legal advice that it was unlawful.
The issue arose when the company acted as a buyer of last resort, buying an adviser’s client book if they were unable to sell it to another authorised AMP representative.
AMP is still repaying customers for the mistakes aired in the royal commission.
It paid $190 million to customers in the second half of 2019, bringing the total refunded to $264 million overall.
AMP also blamed increasing regulatory and compliance costs for the lower full-year result and says significant legislative and regulatory change are expected.
Originally published as AMP posts $2.5 billion loss after scandals exposed in royal commission