The future of AMP?
I reckon they’ve only one option.
But first, a reminder of those days pre the 2000 Sydney Olympic Games.
I first heard the term ‘puzzle-palace’ in the reception of AMP Alfred Street’s Sydney foyer – it was just pre-Games.
The helpful guy manning reception said the place could be a bit of a ‘puzzle-palace’ as he tried in vain to find the whereabouts of my scheduled meeting on his screen.
When I probed him regarding the term, he jokingly replied it was an ‘affectionate term’ used by many of the AMP agents to describe some of the experiences they faced when dealing with their colleagues in their Sydney head office.
Puzzle-Palace?
At the time AMP was enjoying the heady days pre the Sydney Olympic Games.
AMP had achieved a lot over the preceding two years with a listing on ASX, starting AMP Bank, and launching an ambitious UK venture.
They were also a major Games sponsor and their brand was on a high.
Based I believed, on genuine community sentiment literally driven by a truck – The AMP Torch Relay semi-trailer that crisscrossed Australia pre-Games.
As the big bright aqua-blue AMP semi-trailer steered their sponsored Torch Relay to different Australian country towns each day, it created a mini-celebration for every town lucky enough to be visited.
Doing what they did best, AMP brought together local communities to host the Torch and celebrate their local communities.
At the heart of each day’s genuine community event, often caught on our nightly newscasts, were AMP people – proud to be serving, supporting and promoting their local communities.
What’s happened to AMP?
I was reminded of my front desk conversation about the ‘puzzle-palace’ last week reading about the Hayne Royal Commission.
The reports are damning, the CEO and Chairman exit an easy first couple of steps.
There are harder steps ahead.
AMP is a gold medalist for rent-collection.
Back pre-Games, Australians trusted the brand and loyally renewed their AMP insurance policies and superannuation products every year.
But once trust is lost, rent-collection models don’t work – ask anyone invested in old taxi-plates – Uber ruined those rent-collection models and the market lost trust in the value of taxi-plates.
AMP’s Big Three Problems…
But AMP has bigger problems than just winning back the trust it once held.
AMP has a succession issue.
AMP advisers are on average in the twilight of their loyal careers and the impending educations changes have many of them looking to get out by proposed new education standards in 2024.
AMP has an ‘us v them’ issue.
The disconnect between the real AMP throughout Australia, so evident during the 2000 Torch Relay, and AMP in Alfred Street – the puzzle-palace – was clearly evidenced in the recent Royal Commission reporting.
There’s not only a disconnect between AMP Puzzle-Palace and those in the field, but there was also an obvious gap between the Board and the firm’s senior legal counsel who took a hit for 25 re-drafts of a so-called ‘independent’ legal report regarding ASIC Fees for No Service report a couple of years ago.
And the biggest issue – AMP has a percentage issue.
AMP makes its money by charging percentages.
Percentages are at the heart of all conflicts.
The reaction from charging dead people for advice and for charging living people for no services is the tip of the percentage game that has built AMP and many financial service groups.
Percentage charging for services has always failed to look after thousands of Australians – a model that pays regardless of service doesn’t make sense.
If more Australians had to write a monthly cheque for the percentage monthly fee from their financial services provider – they wouldn’t.
Building financial services firms on that model is hopefully dead thanks to this Justice Hayne’s Royal Commission.
Even if customers don’t initially get it – the new market entrants do.
Unlike the banks who can (and some probably now can’t wait to) sell their wealth divisions, AMP’s wealth and insurance models are the heart of the business model.
Selling these is not a choice.
AMP needs a different model.
And, there is one.
It means going back to their origins.
Go back to being a great product company.
Superannuation balances are only going to grow, financial literacy is only going to improve (thanks in large part to current headlines), and Australians need for advice is only going to grow.
Re-build the company to become the first-choice supplier of financial products and services for not only their large array of advisers Australia-wide but all advisers.
Remove all conflict from all their products and from all the financial services platforms they offer.
Offer salaries to those who want to retain the security of existing buyback of ‘advisory business’ whilst removing all other buy-backs agreement for those willing and wanting to build valuable revenue streams based upon quality advice rather than quantity of product sold.
For their survival and new levels of prosperity, AMP needs a re-birth.
AMP must aim to be the supplier of the first choice for all professional advisory firms throughout Australia based purely on the quality of their products.
But I doubt the current custodians of the puzzle-palace have the skills to do it.
Back in early 2000, AMP seemed to have it all.
Brand, community trust, valuable company, and tons of potential.
I think AMP’s best days are behind them.
I hope I am proved wrong as the brand and majority of people that have been so loyal for so long, deserves much better.
About Jim Stackpool
For nearly 30 years Jim has influenced, coached, and consulted to advisory firms across Australia. As founder of Certainty Advice Group, a group of Advisory Firms from all over Australia that separates financial advice from financial products as the best way to professionally deliver greater certainty for their clients. As an author, blogger, columnist, and keynote speaker, Jim is regularly called upon for his professional insights into the advice industry. His latest book Seeking Certainty is available now.