Scandal-hit AMP appoints Francesco De Ferrari as new CEO

AMP’s newly-appointed CEO stands to make a small fortune if he can turn the embattled company around.

Francesco de Ferrari. Pic: Renee Nowytarger

Embattled wealth group AMP (AMP) has promised Credit Suisse private investment banker Francesco De Ferrari a small fortune if he can turn the company around.

AMP announced Mr De Ferrari as its new chief executive, replacing Craig Meller who stepped down in the wake of the damage wrought by the royal commission.

Mr De Ferrari, who has spent the last 17 years with Credit Suisse where he was head of the Swiss bank’s South East Asia division and the boss of its Asia Pacific private bank, has been pledged huge incentives if he can overhaul the troubled AMP business, and if he sticks it out at the 169-year-old company for about five years.

With AMP’s reputation shredded by the royal commission and the group’s business model under threat from looming overhauls in the superannuation sector, wealth management industry and the potential risk large conglomerates are forced to break up, Mr De Ferrari has been signed onto the top job at AMP with almost $18 million in possible performance bonuses on top of a maximum $8.3m annual salary.

His pay packet includes a base salary of $2.2 million a year, with the potential to earn $6.1 million in short and long term incentives.

But AMP has also agreed compensate Mr De Ferrari for incentives he will leave behind at his employer of 17 years, with a swag of cash as well as AMP shares, rights and options that make up the $18 million in possible bonuses.

They include $1.7 million in cash, $300,000 worth of options over AMP shares and 4.56 million buy-out and recovery shares and share rights worth $15.3 million.

Investors seemed to be shrugging off today’s new CEO appointment in early trade. Against the backdrop of a 0.5 per cent fall on the broader market, AMP, which is ex-dividend 10 cents today, was down 10.5 cents, or 3 per cent at $3.345..

Mr De Ferrari replaces Mr Meller, whose retirement was brought forward after the royal commission revealed AMP had misled the corporate regulator 20 times over its fees-for-no-service scandal. The revelations have also prompted the exit of chair Catherine Brenner and numerous board members, and have seen AMP’s share price tank about 40 per cent since March.

Mike Wilkins, currently acting as interim chief executive, will hand over to Mr De Ferrari at the start of December.

New AMP chairman David Murray said Mr De Ferrari had “extensive experience in redesigning business models to drive turnaround and growth”. Mr Murray, a former Future Fund chairman and Commonwealth Bank chief executive, is a senior advisor of Credit Suisse, based in Sydney.

“The board conducted an extensive global search to identify the best leader to drive change at AMP,” Mr Murray said. “Francesco is a proven change agent who will bring the strategic acumen and expertise to spearhead the transformation needed in our business.”

Mr Murray said the large potential bonuses for Mr De Ferrari, which include short term incentives of 120 and 160 per cent on top of a bases $2.2m salary, the promise of cash and shares worth $12m for staying with AMP until early 2022, and $6m worth of shares if he gets the stock price higher than $5.25 by early 2023, were designed to “drive the recovery of AMP and recognise the degree of challenge in the task ahead”.

“His remuneration and incentives are directly aligned with the interests of shareholders,” Mr Murray said.

Mr De Ferrari said he was privileged to have the opportunity to shape the future of AMP.

“While 2018 has clearly been a challenging year for the business, I’m confident we can earn back trust which will underpin the recovery of business performance,” Mr De Ferrari said.

Along with the exit of Mr Meller and Ms Brenner, group general counsel and company secretary Brian Salter exited as the company sought to rebuild trust with customers.

Three directors - Holly Kramer, Vanessa Wallace and Patty Akopiantz - are also leaving or have left.

Former Treasury Secretary and former UBS banker John Fraser has joined the board in recent times.

While AMP is still recovering from the fees-for-no-service scandal, last week the royal commission heard AMP and its complex web of subsidiaries kept the trustee of its superannuation business in the dark over its strategy and plans, including one to drag out the legally-required transition to low-fee funds, to retain up to $86.5 million of future profits.

Under examination, Rachel Sansom, AMP’s director of regulatory governance who helps run the company’s superannuation trustee division, revealed that the trustee lacked the power to set the level of fees its members were charged, could not set investment return targets, and had trouble getting different arms of the conglomerate to agree to common measurements of investment performance.

In fact, Ms Sansom admitted that any changes to lower fees for the fund’s flagship MySuper products - which occurred for the first time recently in July, just weeks before AMP returned to the royal commission for a second time but five years after the products were introduced - would have to be approved by AMP’s powerful board, as it would affect the profitability of the overall business.

Just before its most recently royal commission appearance, Mr Wilkins flagged compensation close to $300 million for victims of poor financial advice and a raft of cuts to superannuation fees; the first change to its ostensibly low-fee MySuper product since its inception.

But there is still trouble on the horizon: the company’s pre-results warning and guidance failed to take into account an expected further hit worth close to $100m from a government crackdown on fee-gouging of ultra-low balance super accounts with savings under $6000.