Nick Dignam from Fortitude Investment Partners shares insights with Lachlan Maddock from Fortitude Investment Partners on how a diversified portfolio in mid-market private equity is structured. The Inside Adviser
The world of alternative investments is at a crossroads. As markets defy expectations and liquidity concerns take centre stage, investors find themselves forced to rethink how they deploy capital in an increasingly complex environment.
AMP Advice to ‘break even’ by 2024 as losses soften
AMP has put its stake in the ground, declaring it intends to break-even on advice in 18 months despite further falls in assets under management and outflows in its advice division.
The group announced a $30 million net loss on advice as part of its 1H22 results call Thursday morning, although that was a $55 million improvement on the $85 million lost in 1H21.
“We do remain on track to reduce by half the profit loss from the first half,” CEO Alexis George commented on the results call. “This is a critical step as we move towards breaking-even by 2024.”
Net cash outflows for the Australian Wealth Management division continued for the group, yet followed a similarly positive direction; after $3.6 billion went out the door in 1H21, $1.9 billion was lost in this period. AMP attributed the improvement to “lower outflows across products.”
A better tomorrow
The results reflect what George characterised as the “transformation” of the group’s wealth management arm, with a reshaping of its licensed adviser cohort away from “one- and two-man bands” and towards a more contemporary and profitable division.
“AMP is entering its next era as a significantly simplified group, leading in wealth management and banking, and guided by a clear purpose – helping people create their tomorrow,” George said in a statement.
The project involves a number of overlapping initiatives, including the launch of AMP’s ‘user pays’ professional services model, paying-down its eye-watering client compensation bills, shedding non-profitable advice businesses and pushing its advisers through the education mandate.
Ninety-seven per cent of AMP advisers (and professional-year advisers) had completed their adviser exam by June 2022, AMP noted.
Along with its transformation project the group has bolstered its advice executive team, bringing ex-Suncorp CEO Scott Hartley and former Loan Market head Matt Lawler into the fold over the last 18 months.
The North investment management platform remains crucial for AMP, with attracting independent financial advisers to the platform a key focus. Cash inflows from IFAs increased 49 per cent on 1H21, George noted. “We’re not slowing pace, with more improvements planned for the second half as we build North to be one of Australia’s leading investment platforms,” the COE added.
Sobering numbers
The improvements highlighted by AMP, however, can’t hide what is another largely negative results call for the group.
Australian Wealth Management’s total assets under management fell from $142.2 billion (FY21) to $126.3, buffeted by negative investment market returns. Adviser numbers fell further during the period and the group’s reputation remains tarnished since the Hayne Royal Commission.
Wealth management business earnings still fell 20 per cent, with the decline only partly attributable to more competitive pricing on its North platform. The numbers remain poor.
More broadly, the group’s total net profit (after tax) decreased 25 per cent from $155 million (1H21) to $117 million in 1H22.
According to George, “much of this was predictable.”
For AMP Advice, profitability in 2024 remains the target. AUM outflows and adviser retention issues persist, but George believes the ship is slowly turning.
“We’re trying to move advice into a contemporary business,” she told shareholders. “The revenue per adviser is starting to improve. The adviser numbers are down slightly but that’s probably what we expected given this transitionary period.
“We’re not walking away from.. 2024.”
