AMP lost one of its largest corporate super mandates when Australia Post chose industry fund AustralianSuper to manage its default super product.
It also found itself facing five competing class actions – launched by essentially the same pool of disgruntled shareholders – in relation to its past misbehaviour in charging fees-for-no services and repeatedly lying to the corporate regulator about the issue.
Investors are also rattled by the latest announcement from the prudential regulator – it has issued directions and imposed additional licence conditions on AMP Super to ensure it makes “significant changes to its business practices”.
Huge uncertainty about AMP’s outlook
But bad though all these developments are, there’s an even bigger factor weighing on the AMP share price. And that’s the huge uncertainty about the outlook.
In the immediate term, this uncertainty hinges on when AMP’s proposed $3.3 billion sale of its life insurance business to Resolution Life will be finalised, and whether or not AMP will return the $1.9 billion in cash it expects to receive from the sale to its shareholders.
But the far bigger unknown is whether the group will be able to come up with a plan to transform its huge financial advisory business, so that it can provide quality advice at an affordable price.
No one underestimates the magnitude of this challenge. The big banks have decided to quit the scandal-plagued personal financial advice business. Westpac – which had been the most committed to the sector – announced its decision in March.
AMP’s new managing director Francesco De Ferrari has been tasked with coming up with a strategy to transform the company’s long-standing relationship with its vast network of financial planners.
While details are scant, this is expected to involve AMP cutting ties with unproductive financial planners, because their businesses are no longer viable given that the wealth manager has succumbed to pressure to scrap grandfathered commissions.
It will also be under pressure to reduce its cost base by scaling back the support it provides to its remaining financial advisers.
It’s generally expected that De Ferrari will provide more details on his transformation plans when the group announces its half-yearly results in August.
But even the most stalwart AMP investors are bracing for a long period of shrinkage before the wealth manager stabilises itself and perhaps begins to increase its market share.
At AMP’s annual general meeting in May, De Ferrari signalled to concerned shareholders that it would take three years to return the wealth management arm to growth.
He warned that 2019 was “going to be a year of transition where we need to work on those really big priorities because if we don’t deliver those, it’s very hard then to build a future”.