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.

Australians have been taking their cash out of AMP funds and superannuation schemes, with almost A$4b being withdrawn or shifted to rivals during the year.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.

Blair Vernon, AMP New Zealand’s managing director, said the AMP KiwiSaver Scheme continued to grow, with $5.1b under management.