AMP Super ordered by APRA to make changes to management

Regulators have ordered changes at AMP Super amid concerns that emerged in the Hayne inquiry.

APRA wants improvements in AMP Super’s management, governance, culture and accountability. Picture: Hollie Adams.

The banking regulator has issued strict compliance orders on AMP Super amid concerns over its governance, risk culture and management following the Hayne royal commission.

The Australian Prudential Regulation Authority said it had issued directions and additional licence conditions to AMP Superannuation and NM Superannuation Proprietary — collectively AMP Super — to address issues and ensure “significant changes” are made to business practices.

“Areas identified for improvement include conflicts of interest management, governance and risk management practices, breach remediation processes, addressing poor risk culture and strengthening accountability mech­anisms,” APRA said in a statement.

The action comes after AMP Super was referred to APRA following the royal commission for failing to act in its members’ interests and potentially not complying with relevant laws.

APRA is also compelling the wealth group to appoint an external expert to report on compliance with its orders.

The regulator’s action hit AMP’s shares hard yesterday, with the stock slumping 5.8 per cent to close at $2.11. That is not far off the record lows earlier this year of $2.09.

The AMP measures follow APRA’s imposition of licence conditions on fellow under-fire wealth group IOOF, which it is also pursuing in court action.

In new research, Morgan Stanley analysts warned yesterday of tough times ahead for AMP and IOOF as structural shifts take hold in the $2.7 trillion superannuation market.

These include a “profit pool crunch” and a heightened focus on trustees acting in members’ interests.

“Executing on mission-critical issues (remediation, planner productivity and life separation) is ­essential to stabilising the platform and a precursor to AMP tackling strategic issues and ‘flipping’ its business model. The strategic overhaul to capture future value in advice is likely to consume $400 million-$500m of distributable capital,” APRA said.

AMP closed down 13 cents at $2.11

The royal commission heard that the AMP board’s outsourcing arrangements meant it was ­largely unaware of the depth of its investment underperformance, and that the company was hamstrung to prevent fee-­gouging by related parties.

Last month, AMP’s super­annuation arm was hit with a separate class action lawsuit by Maurice Blackburn for allegedly charging fund members “unjustifiably” high fees for an extended period of time.

APRA’s directions require AMP Super to “renew and strengthen” its four-member board, which currently comprises of interim chairman Tony Brain, independent directors Cathy Doyle and Louise Dudley, and ­director Darryl Mackay.

In a separate statement, AMP said it would fully implement the APRA directions and licence conditions.

“We have been working constructively with APRA on this matter and have already taken ­action on a number of the issues raised,” AMP told the ASX.

The embattled company was one of the more prominent firms to feature at the royal commission, where it faced various accusations of wrongdoing including misleading the corporate regulator and charging clients for ­advice they never received.

AMP subsequently lost its chairman and chief executive last year and has haemorrhaged billions of dollars in funds.

Last month AMP shareholders voted in favour of the company’s remuneration report, as new chief executive Francesco De Ferrari told them it would be a multi-year journey to lift earnings and ­rebuild the company’s standing.

Additional reporting: AAP