by David Chaplin*
Blair Vernon, AMP NZ managing director, has a busy few months ahead of him. Vernon, along with Sydney-based AMP head of life, Megan Beer, has been charged with knocking the rag-tag NZ business – deemed as deadweight by the new, “leaner” Australian parent – into IPO-ready material some time next year… maybe.
“We’ve said the IPO will be in 2019 – and we’ve already started the preparation work,” he said. “But the exact timing [of an IPO] will be a function of the speed of separation and market conditions. We will keep an open mind.”
After untangling various corporate entities linked to the Australian parent, Beer and Vernon will have a few pieces of NZ financial services puzzle to put together, namely: over $8 billion in superannuation money split between a $5 billion plus KiwiSaver scheme and $3.2 billion master trust (with, perhaps, $1 billion or so of other non-super investment funds including some held through the AMP WealthView platform); a disparate range of financial advice businesses and contractual relationships; and, advisory business paraphernalia such as compliance, administration and front-end tools.
Rolling the various advice businesses into a coherent arrangement will likely be the trickiest job for Vernon et al. However, he said AMP was “not unfamiliar” with the process of merging advice firms following its 2012 takeover of Axa – a shotgun marriage of two different advisory models.
Vernon said the AMP NZ advice business falls into four different “buckets”: employed advisers; the AdviceFirst brand (now blended with the iconic Spicers investment advisory business); distributor relationships via the AMP qualifying financial entity (QFE) badge or agency agreements; and, arrangements with “thousands” of independent financial advisers.
AMP owns 85 per cent of AdviceFirst, which houses about 50 advisers – an ownership structure that would likely change under an IPO. The NZ group also has tied distribution deals (through QFE or agency agreements) with roughly 230 advisers representing 60 underlying businesses.
According to the AMP half-year report to June 30 this year, the NZ financial services arm counted about 400 advisers under its control.
However, corralling the mixed bunch of advisers – ranging from investment specialists to diversified financial planning and old-school ‘lifies’ – into an IPO-friendly whole won’t be easy.
The AMP KiwiSaver, NZ Retirement Trust (NZRT) and assorted retail managed funds represent the sort of ‘sticky’ money that investors might find attractive. But while the group’s KiwiSaver scheme is the country’s fourth-largest, it used to be the third-largest: in fact, AMP has been bleeding thousands of members year-on-year, which hints at some distribution weaknesses.
“KiwiSaver net cashflows in Q3 were A$85m, down from A$107m in Q3 2017, due to increased competition and higher retirement withdrawals,” the AMP September 2018 quarter report says.
If the IPO does go ahead, though, the rump AMP NZ business will have a distinctly different flavour compared to its soon-to-be ex-parent. Post the A$3.3 billion sale of the life business to Resolution Capital, the Australian group will retain AMP Capital and its adviser army under the same corporate roof.
But AMP NZ (or whatever name the business ultimately takes on) will have no direct ownership links with either investment or life insurance manufacturing following an IPO. Resolution will take over life insurance duties while the $20 billion plus AMP Capital NZ funds management unit will remain part of the sleeker Australian business.
Vernon said AMP NZ has already initiated divorce proceedings from AMP Capital via just-amended disclosure documents.
“We’ve inserted the word ‘currently’ before ‘a related party’,” he said, opening the way for a formal separation next year.
To a certain extent, AMP NZ financial services and AMP Capital have been living apart anyway: for example, the AMP KiwiSaver scheme now offers a wide selection of underlying fund managers (albeit that AMP Capital still manages the bulk) while the FNZ-enabled WealthView wrap similarly provides broad investment choice.
Post-IPO AMP Capital will be just another fund manager vying for distribution through the AMP NZ network, Vernon said.
Overall, the AMP NZ financial services business is expected to generate about A$40 million, an AMP statement says. If all the complex unwinding of AMP’s ‘manage for value’ units (covering NZ, life and ‘mature’ products) go to plan, the remnant – comprising AMP Capital, AMP Bank and Australian wealth management – will create a “leaner and simplified business well positioned to compete in a changing environment”.
Last Friday AMP shares closed down almost 5 per cent at an historic low of A$2.38.
*David Chaplin is publisher of Investment News NZ