Fees scandal decimates AMP profits
AMP’s profit plunged last year as the financial services company had to set aside vast sums to repay money taken from Australian customers in the ‘‘fees for no service’’ scandal exposed by Australia’s royal commission of inquiry into banking misconduct.
Its profit went from A$848 million (NZ$884 million) in 2017 to just A$28m in 2018.
The trans-Tasman company’s New Zealand operation recorded little movement from the previous year.
AMP chief executive Francesco De Ferrari said 2018 had been ‘‘a challenging year’’ in an announcement to the Australian Securities Exchange.
‘‘The royal commission has been a confronting but valuable experience for the financial services industry and has served as a catalyst for change at AMP.’’
Changes include having to speed up repaying customers it charged unjustified fees, cutting fees on superannuation funds, overhauling its board and executive team, and gearing up to sell its wealth management and life insurance businesses.
AMP recorded A$496m to compensate customers, as well as spending A$32m on legal advice and consultants to prepare for the royal commission hearings.
‘‘We have undertaken board and leadership renewal, accelerated client remediation and sharpened our focus on delivering better value to customers including reducing fees on our MySuper products,’’ De Ferrari said.
‘‘The sale of our wealth protection and mature businesses to Resolution Life is also a key milestone for the company, exiting the historic business on which AMP was founded. The sale of these businesses fundamentally resets AMP, reducing the capital intensity of our portfolio.’’
Australians have been taking their cash out of AMP funds and superannuation schemes, with almost A$4b being withdrawn or shifted to rivals during the year.
The decline in funds under management in Australia was not matched by AMP’s New Zealand business thanks to continued inflows into KiwiSaver.
Blair Vernon, AMP New Zealand’s managing director, said the AMP KiwiSaver Scheme continued to grow, with $5.1b in funds under management.
‘‘In 2019, we will continue to prioritise the separation of AMP’s life insurance and mature business to Resolution Life.’’
AMP in New Zealand has been reviewed by the Financial Markets Authority and the Reserve Bank, and is awaiting a report on changes that need to be made here. Other life insurers are due to get similar reports from the regulators.