AUSTRALIA'S largest financial planning network would continue to contribute strong funds growth to AMP despite sweeping changes to planners' business models, AMP chief executive Craig Dunn said yesterday.
Unveiling a 19 per cent lift in underlying first-half profits after tax to $455 million, Mr Dunn pointed to a 12 per cent increase in revenues on the previous corresponding half year for AMP Financial Planning.
"In a world where that new business is written without commissions ... I think that demonstrates the resilience of the sector," Mr Dunn said.
The broader financial planning industry is introducing substantial reforms under the federal government's Future of Financial Advice package.
Reforms include a ban on commissions paid to planners and a new legal requirement for planners to act in clients' best interests.
After its successful merger with AXA in March, AMP almost doubled the number of its financial planners to more than 4000, making it the largest network of financial planners in Australia.
Large wealth management companies' financial planners have previously been criticised for commissions encouraging in-house planners to recommend in-house products, a system known as "tied advice".
Commentators have questioned whether such referrals can survive when planners must meet the "best interests" test.
But Mr Dunn said he did not see the proposed reforms as "having any effect on our capacity to grow our business", citing the doubling of AMP Flexible Super in the half to $2.8 billion.
Mr Dunn described the opt-in element contained with in the reforms as bad policy, which requires customers to "opt in" to receive further service from their financial planner.
But he said he supported the bulk of the planner reforms, which would go to improve confidence in the financial planning industry.
Mr Dunn revealed a further $20 million in cost savings from the AXA merger, bringing the total targeted savings from the merger to $140 million.
Costs to achieve the annual savings increased by $25 million to $310 million. Mr Dunn said the merger was performing well and there had been a strong retention of AXA financial planners.
While recognising volatility in the short-term, Mr Dunn said the medium term looked "highly attractive" for investment management business in Australia, buoyed by a lift in superannuation contributions from 9 per cent to 12 per cent.
AMP's statutory profits decreased by 18 per cent to $349 million, which AMP attributed to one-offs, including integration and merger costs relating to AXA.
The profit was broadly welcomed by analysts as a solid result in line with forecasts. AMP shares finished up 11? at $4.26, in a market that fell by 1.2 per cent.
Frequently Asked Questions about this Article…
How does AMP say the Future of Financial Advice reforms will affect its business?
AMP’s CEO Craig Dunn said the proposed Future of Financial Advice reforms — including a ban on commissions and a legal duty for planners to act in clients’ best interests — should not hurt AMP’s capacity to grow. He supports most of the planner reforms as a way to improve confidence in the industry, though he described the opt-in requirement as bad policy.
What were AMP’s first-half financial results and what do they mean for investors?
AMP reported a 19% lift in underlying first‑half profit after tax to $455 million, while statutory profit fell 18% to $349 million because of one‑off integration and merger costs. Analysts broadly welcomed the result as in line with forecasts, which helped AMP shares finish higher.
How did AMP Financial Planning revenue and adviser numbers change recently?
AMP Financial Planning recorded a 12% increase in revenues versus the prior corresponding half. After merging with AXA in March, AMP almost doubled its number of financial planners to more than 4,000, making it Australia’s largest financial planning network.
What impact did the AXA merger have on AMP’s cost savings and integration costs?
Following the AXA merger AMP revealed an additional $20 million in cost savings, taking the targeted total to $140 million. However, costs to achieve those annual savings increased by $25 million to $310 million. Management said the merger is performing well with strong retention of AXA planners.
Will the ban on commissions and the ‘best interests’ duty end tied advice and in‑house referrals?
The article notes commentators have questioned whether tied advice and in‑house referrals can survive under a strict best‑interests test. Craig Dunn said he does not see the reforms as affecting AMP’s ability to grow, suggesting AMP is confident it can operate successfully without commission-driven referrals.
How did AMP Flexible Super perform amid the reforms and merger?
AMP Flexible Super nearly doubled in the half to $2.8 billion, a result Craig Dunn cited as evidence of the business’s resilience even as the industry faces reform.
How did markets react to AMP’s results and what happened to the share price?
Analysts welcomed AMP’s profit result as solid and in line with forecasts. AMP shares finished up about 11% at $4.26 on the day the market fell 1.2%.
What are AMP’s medium‑term prospects according to management?
Craig Dunn said that despite short‑term volatility, the medium term looks ‘highly attractive’ for AMP’s investment management business, helped by a lift in compulsory superannuation contributions from 9% to 12% which should drive more funds under management.
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