‘No quick fix’ but AMP vows to arrest cash outflows

AMP chair David Murray says the group has a ‘serious focus’ on stemming massive outflows from its wealth management unit.

David Murray at AMP’s annual general meeting in Sydney yesterday. Picture: AAP

AMP chairman David Murray is adamant the group has a “serious focus” on stemming massive outflows from its wealth management unit, after suffering the biggest quarterly net cash outflows in more than seven years.

In an update ahead of AMP’s annual general meeting on Thursday, the company said net cash outflows from retail and corporate superannuation on its own and external platforms amounted to $1.8 billion in the March quarter. That eclipsed the $1.6bn in net outflows in the previous three months and the $200m in net outflows in the same period in 2018.

The first quarter outflows included $538m of regular pension payments, but the company acknowledged it also reflected continued weakness in inflows and higher outflows following the fallout from the Hayne royal commission.

The biggest outflows in the quarter came from AMP’s Flexible Super unit, which was closed to new business from July 2010.

New AMP chief executive Francesco De Ferrari told investors a turnaround in the group’s wealth management division was likely to take three years.

“Companies lose trust very quickly … unfortunately there is no silver bullet here,” he said.

Francesco De Ferrari at AMP’s meeting in Sydney yesterday. Picture: Britta Campion

Mr Murray conceded reputational issues following the royal commission had made it more difficult for AMP to retain business, but rectifying the issue was a priority.

“We are acutely aware of the difficulty of losing business but we have to get through all the work at AMP to fix that up,” he said on the AGM sidelines.

“At the board we’ve looked at what is actually going on in the business, areas where we are doing well, areas not so well, and whether reputational issues are a factor in those cash outflows and we’ll keep doing that.

“We’ve changed pricing in a number of areas and our people are spending more time where necessary, but it is an area of serious focus and was from the time we started after the royal commission last year to make sure we could defend our business as best as possible.”

Mr De Ferrari said his initial priorities was stabilising and transforming the company and providing employees with a “clear sense of direction”.

“This transformation of AMP is going to be a multi-year journey and will not happen overnight,” he said.

Mr De Ferrari said 2019 would be a year of transition, after which he wanted to home in on costs and making AMP more capital efficient.

The business update spurred a sharp sell-off in AMP stock yesterday before the shares pared losses to finish 2.6 per cent lower at $2.25.

At the royal commission, AMP was accused of misleading the corporate regulator on numerous occasions and was also entangled in a scandal where advisers charged fees where no services were provided.

The furore led to the departure of former chief executive Craig Meller and chair Catherine Brenner.

Other retail super providers have also confronted outflows after the royal commission, largely to industry funds which fared better during the process and have tended to notch up better investment performances.

AMP’s update did show that assets under management in its wealth division rose 5 per cent to $129.3bn, helped by positive investment markets.

Infrastructure and real estate arm AMP Capital saw its AUM increase 4 per cent to $194.6bn, and wealth management AUM in New Zealand grew 7 per cent.

AMP’s bank saw its deposits increase and its loan book rise by $127m to $20.1bn in the first quarter. The AGM also saw some respite for the group as it avoided a second strike against its pay report, and a potential board spill. More than 89 per cent of investors voted in favour of the remuneration report, with 10.6 per cent lobbing a protest vote against the document.

Last year, investors hit AMP with a 61 per cent vote against its pay report. Mr Murray copped a protest vote of about 13 per cent from investors yesterday but was easily elected to the board. The elections of non-executive directors John Fraser, Andrea Slattery and John O’Sullivan were overwhelmingly supported by shareholders with those board members receiving votes higher than 95 per cent in their favour.

Mr Murray defended the $3.3bn sale of AMP’s life insurance arm and said as well as fixing its culture AMP needed to ensure it had viable systems to avoid the governance and compliance issues of the past.

“There is no quick fix but with the right leadership, capability, systems and customer focus, we intend to turn this business around,” he said.