AMP reinvents advice model in wake of bruising Royal Commission findings

Australia’s AMP Limited is moving to a new model of financial advice as it seeks to shake off the regulatory legacy of its bruising experience in the financial services Royal Commission.

The listed financial services firm said on Monday it would introduce a new approach to the provision of financial advice as part of a demerger from its infrastructure and property units.

The company said the new service model, with its aligned advice network, would mark a “new era for financial advice at AMP”.

“The new model further prioritises clients with AMP providing services to advisers which support the delivery of quality advice, improve practice efficiency and help advisers grow their businesses,” AMP said in a statement.

Consolidation unwinding

The new model reverses the trend towards consolidation that has dominated Australia’s financial advice sector for the last three decades. It is part of a broader shift across the Australian financial sector to separate banking and other services from the provision of financial advice.

AMP’s model was developed in collaboration with the institution’s adviser associations, which hold significant influence over the business. The company said its new model would be introduced in stages, with the goal of giving advisers choice, flexibility and transparency in how they operate their business.

Matt Lawler, AMP’s managing director of advice, said the company’s post-Royal Commission business model was to be a “professional services provider” to independent financial advice practices.

“It is a new era for financial advice at AMP. Over the past few years we have worked with our financial adviser network to complete significant reforms, build robust and modern processes and are strengthening our compliance regime,” Lawler said. 

New fee model

The restructure will introduce a new service proposition and fee model for advice practices. It includes a set of core services as well as user-pay services. The new fee model will be phased in throughout 2022.

The changes will also transfer AMP’s clients from AMP Financial Planning to the advisers. There will also be an opportunity to transfer clients out of the AMP network. This change will take effect from January next year.

AMP will also wrap up its client register “buyer of last resort” arrangements from December 2021. Under this model advisers can sell their book back to AMP at a guaranteed rate.

The company said it expected to see “further advice practice exits” throughout the year, though these have been funded by its existing capital allowances.

“These changes represent a new value proposition to our financial advisers, one that is centred around us being a professional services provider to quality financial advice practices,” Lawler said.

“The new model releases institutional ownership. Buyback arrangements will also cease, with advisers having between now and the end of the year to make the decision to leave the network under their existing arrangements.”

“Step in the right direction” for advice

Craig Armstrong, chair of the AMP Advisers’ Association board, said the new model was a step in the right direction for the post-Hayne provision of financial advice in Australia.

“We believe this model creates a more sustainable business model for our members staying with AMP and supports the shift to the professionalisation of the advice industry,” he said.

“Our members will now be able to focus on what they do best: delivering quality advice to their clients as well as delivering more advice to more Australians.”

This article first appeared on Thomson Reuters Regulatory Intelligence.

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Nathan Lynch is an experienced writer, public speaker, manager and technology enthusiast in the field of financial regulation and risk management. At Thomson Reuters, Nathan leads a team of experts who provide breaking news, deep analysis and practical guidance to risk practitioners in the global financial services sector.
Nathan manages Thomson Reuters’ award-winning Regulatory Intelligence team across the Asia-Pacific region, tracking developments in financial services law, regulation, financial crime and risk management.
Nathan has been involved in building innovative, tech-based businesses in the financial services “regtech” sector — including Complinet Australia and the Thomson Reuters Risk business.

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