AMP Super ordered to improve practices from APRA

 smh.com.au  06/14/2019 03:44:01 

Shaw and Partners analyst Brett Le Mesurier said APRA's move on AMP would probably hold back any potential improvement in flows of money into the super business.

"It's probably just another hit, though nowhere near as significant as the damage they took at the royal commission. It's all unhelpful as they are trying to repair the situation," he said.

"For those who are hoping thing are getting better, this is an indication of the extent of the change that needs to be done."

This extends AMP's time in the doldrums.

Clime Asset Management portfolio manager David Walker

AMP said it would fully implement APRA's orders and it had already been working on some of the matters. AMP shares dropped 5.8 per cent to $2.11.

Morningstar analyst Chanaka Gunasekera said APRA's intervention, alongside class actions against AMP and the possibility of action from the corporate regulator, would keep its problems in the public consciousness, potentially harming inflows.

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"It may be harder for them to attract investors or retirees. If this continues it will be harder for them to attract financial advisers as well," he said.

AMP was one of the firms most damaged by the royal commisison, which heard the financial firm's super funds outsourced operations to other AMP businesses, paying these entities hundreds of millions in fees.

APRA would not say what the new conditions were, or precisely what orders it made. But it said they were aimed at making "significant" changes to AMP Super's practices, including how it deals with conflicts of interest, a poor risk culture, and accountability.

Clime Asset Management portfolio manager David Walker said APRA's concerns were "fairly major," and meeting its requirements�would chew up management time and resources.

"It will take time, it will be expensive, it will take management and board time," Mr Walker said. "This extends AMP's time in the doldrums," he said.

APRA also said it would require AMP Super to "renew and strengthen its board," as well as demanding it hire an external expert to report on its compliance with APRA's orders.

AMP said it had last month expanded its superannuation trustee boards and taken steps to strengthen the independence of trustees. It also pointed to fee cuts it had previously announced.

Separately, Morgan Stanley analysts on Thursday night downgraded AMP in a new report that said the commercial viability of vertically-integrated wealth managers such as AMP and IOOF was "unclear."

The analysts said the royal commission had sharpened the focus on independent trustee boards, which risked taking revenue from wealth managers to super fund members. It warned such "structural shifts" could displace more than 90 per cent of AMP's earnings from wealth management.

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