Regaining trust AMP’s first step

Embattled AMP’s new wealth management boss, Alex Wade, is confident of the group’s loing-term future.

Alex Wade AMP 2.jpg

Embattled AMP’s new wealth management boss, Alex Wade, believes the group has “all the ingredients” to be a leading financial advice provider, but it will take a lot of work to reshape the business and win back trust.

After AMP announced fee cuts for its MyNorth investment platform, Mr Wade told The Australian that despite the dramatic fallout from the Hayne royal commission, he was optimistic on the company’s prospects.

“We’ve addressed some structural changes,” he said 10 weeks into his new role and in his first interview since joining AMP. “We have a lot to do to reposition AMP and win back trust.

“We have all the ingredients in the firm, we just need to bring it together better. Advice is the core offering for AMP.”

Among Mr Wade’s early priorities are to improve AMP’s focus on clients and simplify its advice model.

His comments follow AMP’s roasting at the Hayne royal commission over a fee-for-no-service scandal and allegations prior management misled the regulator numerous times. The revelations led to the departures of former chief Craig Meller and chair Catherine Brenner, while former advice boss Jack Regan did not return to work following gruelling commission hearings.

“It is obviously a very confronting experience for the industry but it also very valuable,” Mr Wade said, labelling the royal commission a “catalyst for change”.

As the model evolves and the big banks retreat from financial advice, he sees opportunities for AMP. “The industry is at an inflection point,” Mr Wade added. “The opportunity is also very exciting.”

But he stopped short of saying AMP would target dislodged Westpac customers, after the bank announced the divestment and closure of its financial planning unit.

“Where those customers come from could be from Westpac or elsewhere,” Mr Wade said.

AMP yesterday joined rivals including Westpac’s BT in cutting fees for platform customers, and introduced a string of other customer benefits amid intense industry competition.

For customers in its Lower Select option, fees are being cut by up to 10 basis points per annum, equating to savings of up to $200 a year for those with $200,000. For its Lower Choice option, fees are being cut by up to 20 basis points or up to $450 a year for investors with $300,000.

Lower administration fee caps for individuals and families will also come into effect in May.

“Following these fee reductions, MyNorth will be one of the best value wrap platforms in market and will compete very strongly,” Mr Wade said, also emphasising the platform’s functionality.

Platforms allow investments to be housed in one place and allow functionality such as centralised reporting.

Shaw and Partners analyst Brett Le Mesurier estimated the revenue impact on AMP would be minimal, due to the tiered structure of the fee cuts.

“Most of the fee reductions will be much less than the 10 basis points and 20 basis points, which the company says makes the impact on revenue immaterial,” he said.

Mr Le Mesurier also expects margin pressure will continue in the platform industry.

“It is just another example of the revenue margin decline, which is going to continue to put a lot of pressure on AMP’s earnings.”

MyNorth houses $24 billion in assets. Unlike the massive outflows in AMP’s superannuation and investments unit, AMP’s overall North platform attracted about $4 billion in net cash inflows in 2018.

AMP’s decision to cut its platform fees also follows a move to reduce charges on MySuper products. AMP chief executive Francesco De Ferrari, who took up the reins in December, announced the hire of his former Credit Suisse colleague Mr Wade just days into his role.