AMP launches custom-built financial advice modelling technology

AMP has today launched a new goals-modelling engine, creating the most sophisticated and contemporary advice experience in the industry.

The engine represents a majorstep forward in AMP’s goals-based customer strategy.

Now part of AMP’s Goals 360 experience delivered through AMP Advice, the engine provides customers with clarity on how the choices they make today impact their ability to achieve their goals over time.

Purpose-built stochastic modelling, developed with leading analytics and technology firm Milliman, factors in economic and market conditions to generate advice strategies to provide customers a projected achievability of their goals.

Tailored cashflow, debt, wealth protection and other wealth management advice strategies are generated in real-time and presented through a seamless, interactive digital experience, developed using human-centred design.

AMP’s Group Executive Wealth Solutions & Chief Customer Officer, Paul Sainsbury said the launch of the modelling engine is a landmark moment for the financial advice industry and the latest step in AMP’s transformation of the goals-based advice experience.

“The engine is the culmination of a multi-year investment program to build AMP’s advice capability of the future,” commented Mr Sainsbury.

“We’ve custom built the engine around goals because we know that when delivered well, goals-based advice transforms the lives of our customers.

“The engine now forms an integral part of AMP’s Goals 360 – a contemporary advice experience for advisers and their customers.

“Underpinned by the latest in financial modelling capability, the engine demonstrates to customers in a visual and engaging way how the choices they make today impact the ability to achieve their goals over time.

“For advisers, it supports richer conversations and helps build stronger relationships with their clients. The engine also creates a more efficient process for advisers – reducing their cost to serve and allowing for ease of compliance.”

The goals engine is being progressively rolled out to AMP Advice practices from this week.

An overview of AMP’s Goals 360 experience, including the goals-engine, follows.

The Goals 360 experience – overview


The first step in Goals 360 is goals exploration.

Guided by a goals coach, customers talk about what really matters to them and what they’d most like to achieve. The result is the goals summary.

At the next meeting with their adviser, planning becomes much more comprehensive. Customers are asked to reconfirm their goals and discuss them in detail.


Customers and advisers then start to model different paths to achieving their goals, and it’s this conversation that has been radically transformed by the new modelling engine – in a highly visual, personalised and interactive way.

Different scenarios can be modelled in front of the client in a way that’s easy to understand. For example, if no changes are made to current behaviour, customers can immediately see the effect on the ‘achievability’ of their goals – represented visually by the bar chart in the top right corner of the goal card.

By selecting different advice strategies that align with the unique goals of the customer the adviser can efficiently model scenarios – enabling a better conversation with customers as they work through options in real time.

The modelling engine can project a client’s balance sheet and cashflows, both stochastically and deterministically, accounting for Australian tax, superannuation and social security rules and regulations, with the flexibility to incorporate multiple future goals of a client.


The engine supports ongoing conversations to track goal achievability as goals evolve and financial circumstances change.


AMP reports 1H 17 results

AMP reported their 1H17 results today. Underlying profit was A$533 million in 1H 17, up 4 per cent (1H 16: A$513 million), and net profit of A$445 million (1H 16: A$523 million).

The results reflect strong operating earnings growth from AMP Capital (+11%), AMP Bank (+10%) and New Zealand financial services (+5%).

Australian wealth protection earnings increased by 11% on 1H 16, reflective of the steps taken to stabilise the business in 2H 16. Australian wealth management earnings declined 1% from 1H 16, largely due to margin compression from MySuper transitions and a reset of the investment management agreement with AMP Capital.

Underlying investment income decreased A$11m to A$50m from 1H 16, due to lower shareholder capital resources and a 50 bp reduction in the assumed underlying after-tax rate of return.

Australian wealth management 1H 17 net cashflows were A$1,023m, up 76% from 1H 16. AMP’s retail and corporate super platform net cashflows were positively impacted by recent changes to superannuation contribution limits and large mandate wins.

AMP Capital external net cash inflows were A$2,439m, up from net outflows of A$153m in 1H 16. Inflows were driven by strong flows into fixed income and real asset (infrastructure and real estate) capabilities.

Underlying return on equity rose 2.6 percentage points to 14.5% in 1H 17 from 1H 16, largely reflecting the impact of capital management programs.

Completion of reinsurance program delivers on strategy, with new arrangements to release approximately A$500 million of capital from AMP Life (subject to regulatory approval) further reducing the capital intensity of the wealth protection business.

Sustained cost management on track to deliver 3 per cent reduction in controllable costs (ex AMP Capital) by FY 17.

Strong capital position with A$1.9 billion over minimum regulatory requirements. Interim dividend increased to 14.5 cents a share, franked to 90 per cent.

Wealth protection: reinsurance update

AMP today announced a series of new reinsurance agreements, delivering on its strategy to release capital from the Australian wealth protection business and reduce future earnings volatility. Releasing approximately A$500 million in capital from AMP Life (subject to regulatory approval), the new reinsurance agreements include:

A new quota share agreement with General Reinsurance Life Australia Limited (Gen Re) to cover 60 per cent of the NMLA retail portfolio, which was merged with AMP Life on 1 January 2017.

An extension to the existing agreement with Munich Reinsurance Company of Australasia Limited (Munich Re) to cover 60 per cent (up from 50 per cent) of the AMP Life retail portfolio.

A new surplus cover agreement with Gen Re to assist in managing risk and volatility in individual retail claims.

Recapture of 35 existing reinsurance treaties, simplifying AMP’s overall reinsurance arrangements.

The new reinsurance agreements will commence on 1 November 2017 and, when combined with the first tranche of reinsurance completed in 2016, effectively means 65 per cent of AMP’s retail life insurance portfolio will be reinsured for claims incurred from 1 November 2017.

Australian wealth management

Australian wealth management operating earnings, down 1 per cent to A$193 million, were resilient. The result demonstrates effective margin management during the final transitions to low-cost MySuper funds and amid significant activity across the superannuation industry. MySuper transitions completed in 1H 17 with margin compression expected to continue to be around 5 per cent this year.

Net cashflows were significantly higher in 1H 17, with stronger inflows from discretionary super contributions ahead of 1 July changes to non-concessional caps. The transition of corporate super mandates also supported inflows, with one mandate bringing more than 3,700 new customers to AMP. During the period, AMP paid A$1.3 billion in pensions to help customers through their retirement.

AMP’s flagship North platform performed well in 1H 17, with flows up 8 per cent and AUM up 13 per cent on FY 16. North now has more than A$30 billion in assets under management.

To offset the impact of margin compression, AMP is targeting additional revenue growth from its Advice and SMSF businesses, which is reported in the Other revenue line. AMP expects Other revenue to increase by 10 per cent in FY 17, with growth in Advice and SMSF revenues emerging in 2H 17 and accelerating into 2018. This will support the delivery of AMP’s target of 5 per cent overall revenue growth in Australian wealth management through the cycle.

AMP Capital

AMP Capital delivered strong growth in operating earnings, up 11 per cent to A$92 million, benefiting from good growth in fee income. External assets under management fees rose by 6 per cent to A$132 million and non-AUM based management fees also increased, benefiting from growth in real estate development fee revenue.

External net cashflows increased to A$2.4 billion, with significant cash inflows into fixed income and higher-margin real assets. Real assets proved popular with investors wanting exposure to leading infrastructure and real estate investments.

Delivering on its strategy to expand internationally, AMP Capital grew its number of direct international institutional clients from 199 at FY 16 to 252 in 1H 17 and now manages A$10 billion in assets on their behalf. In China, AMP Capital’s asset management joint venture, China Life AMP Asset Management (CLAMP), continues to grow rapidly with AUM increasing 22 per cent to RMB 141 billion (A$27.1 billion) in 1H 17. Total AUM for China Life Pension Company, the pensions joint venture in which AMP owns a 19.99 per cent stake, grew 8 per cent to RMB 408.2 billion (A$78.5 billion) in 1H 17.

At 30 June 2017, AMP Capital had A$3.5 billion of committed funds available for investment including funds raised in its Infrastructure Debt Fund III (IDFIII), which has attracted strong international interest.

AMP Bank

Strong growth momentum continued in AMP Bank, with operating earnings up 10 per cent to A$65 million, driven by 17 per cent growth in lending to A$18.8 billion.

AMP Bank delivered residential mortgage book growth of A$1.7b in 1H 17 to A$18.2b (an increase of 18% from 1H 16 and 10% from 2H 16), driven by strong growth in owner occupied lending. Growth in AMP Bank’s investment property and interest only lending segments was constrained, in response to regulatory requirements. They expect this trend to continue in 2H 17.

Above system loan growth was delivered through both the broker and AMP aligned adviser channels. Sales through the AMP aligned channel in 1H 17 were up 49% on 1H 16.

The cost to income ratio rose slightly to 29 per cent, with controllable costs increasing by A$4 million reflecting ongoing investment to support growth. Lending growth in the bank is expected to moderate in the second half as the market adjusts to new regulatory requirements.

Net interest margin declined 4 basis points from 1H 16 but improved 4 basis points on 2H 16.

Asset quality remains strong, with mortgages in arrears (90+ days) at 0.48% as at June 2017. Loan impairment expense to average gross loans and advances was 0.02% in 1H 17, reflecting the conservative underwriting standards

Australian wealth protection

Actions undertaken in 2016 to stabilise and reset the business are working and have delivered an improved result. Operating earnings rose 11 per cent, with improved experience offsetting lower profit margins.

The announcement of further reinsurance agreements, completing the strategic reinsurance program, lessens exposure to retail claims volatility and will further stabilise wealth protection earnings. AMP continued to support customers during their time of need, paying A$575 million in claims during the six months to 30 June.

New Zealand financial services

Operating earnings, up 5 per cent to A$65 million, reflect higher experience profits. AUM increased 6.9 per cent to A$15.5 billion on positive markets.

A strong focus on cost management supported a reduction in controllable costs by 3 per cent to A$38 million and improved the cost to income ratio by 1.4 percentage points to 27.2 per cent.

Australian mature

Operating earnings are up A$6 million from 1H 16 to A$75 million due to strong markets, lower controllable costs and improved experience.

Capital and dividend

AMP’s capital position remains strong, with level 3 eligible capital resources A$1,887 million above minimum regulatory requirements at 30 June 2017, down from A$2,195 million at 31 December 2016.

The reduction largely reflects capital returned to shareholders through an on-market share buy back and investment in business growth during the period. The new reinsurance agreements are expected to release up to an additional A$500 million from AMP Life (subject to regulatory approval).

The interim dividend has been increased to 14.5 cents per share, franked at 90 per cent. The 1H 17 dividend payout is within AMP’s stated target range of 70 to 90 per cent of underlying profit

AMP Bank raises investor rates

From Australian Broker.

AMP has announced changes to investor lending to manage its portfolio responsibly and align with regulatory requirements.

The pricing and policy changes for investment property loans, include:

  • Variable interest rates for new and existing investment property loans will increase by 35 basis points
  • For all new investor property loans, the maximum loan-to-value ratio (LVR) is reducing to 50%. This change applies to all new loans with an investment property as security and includes loans to SMSFs

The changes to interest rates are effective 23 June 2017 for new customers and from 26 June 2017 for existing customers. LVR change is from 21 June for new investment property loans and 1 July for SMSF investor loans.

Sally Bruce, Group Executive AMP Bank commented: “These measures are needed to ensure we operate within our regulatory obligations.

“We’re committed to managing our portfolio responsibly while balancing this with the interests of our customers.

“We are managing our loan book in a very active market and these changes follow recent shifts in competitor activity.  We will continue to take the necessary steps for sound management of our regulatory requirements,” she said.

AMP Bank Lifts Mortgage Rates

From The Adviser.

AMP Bank has, as of this week, increased variable interest rates for owner-occupied interest-only loans by 28 basis points. The increase applies to Basic, Professional Pack, Classic, Affinity and Select variable rate loans and lines of credit. The increase does not apply to construction and land loans.

For example, the Basic package variable rate for new owner-occupier mortgages (interest only) now starts from 4.56 per cent (4.28 per cent comparison).

As well as variable rates, the bank has also hiked fixed rates for owner-occupied and investment interest-only loans by 20 basis points. The increase applies to fixed rate loans between 1 to 5 years as well as for 1-year fixed interest in advance loans.

Fixed rates for owner-occupied principal and interest loans have decreased by 10 basis points.

Existing customers will not be impacted by the changes.

The maximum loan-to-value ratio for interest-only loans will drop from 90 per cent to 80 per cent, effective for loan applications received from Wednesday, 31 May.

This change applies to all owner-occupied loans and loans that include owner-occupied and investment property securities. Master limit applications will also be limited to 80 per cent LVR.

The maximum LVR for purchases of investment property loans remains unchanged at 70 per cent.

AMP aims to be “provider of choice” for brokers

The rate changes were announced on the same day as AMP held its investor strategy day in Sydney, in which the bank revealed that it aims to become the “provider of choice to advisers and brokers” and believes it has “significant potential for future growth” via the broker market.

The group executive for AMP Bank, Sally Bruce, told The Adviser that mortgage brokers had been identified as one of the “key priorities and distribution channels” for the bank, and that it was therefore “looking to increase both the breadth and depth of [its] adviser and broker distribution network”.

Ms Bruce said: “Mortgage brokers currently generate more than 50 per cent of all home loan applications in Australia and, with the credit market growing, and AMP’s market share at just 1 per cent, we believe this market has significant growth opportunity.”

She added that the bank had “boosted the team that supports intermediaries by 20 per cent, helping [the bank] with ongoing improvements to efficiency and speed for turning around applications”.

According to Ms Bruce, this “service-focus, plus a compelling and competitive range of mortgage products, will play key roles in driving growth”.

Speaking at the investor strategy day last week, Ms Bruce noted that the first quarter of the financial year 2017 had seen a 5 per cent boost in both mortgages and deposits.

She commented that the bank was “confident” that the growth would continue for several reasons. Ms Bruce explained: “The first thing is because we have a very strong, established distribution capability… [W]e have the largest advice network in the country and we also have established broker relationships. When you look at that as a channel, it targets more than 50 per cent of all mortgage activity in the market.”

Ms Bruce concluded: “In the broker fraternity and the market generally, we have 1 per cent market share, so we continue to reach further into the network and originate through those people. We’re having great success with that in both of those channels; we’re continuing to get broader reach into more advisers, more brokers, and originating more through them.

“So, we’re just at the beginning of the journey which is what gives us comfort.”

AMP provides update on growth strategy

AMP is today providing an update on its group strategy and growth opportunities at its  Investor Strategy Day, being held in Sydney.  This includes discussion on the changing role of financial advisers.

The strategy will direct investment towards higher-growth businesses in wealth management, AMP Bank and AMP Capital; leverage AMP’s  strengths in overseas markets; and maintain focus on driving cost efficiency.

Key elements of the strategy include:

  • Tilt investment to higher-growth, less capital-intensive businesses. Release and recycle capital from lower-growth business lines to fund growth and returns.
  • Grow wealth management by broadening its revenue streams via increasing contributions from advice and SMSF, while continuing to invest in product and platform development.
  • Build and integrate a goals-based advice operating system across face-to-face, phone, digital and corporate super employer channels.  Explore options to extend advice capability and systems into international markets.
  • Leverage AMP  Capital’s investment management expertise in fixed income, infrastructure and real estate to selected international markets, including Europe, North America and Asia.
  • Continue the rapid growth and increasing contribution of China businesses.
  • Manage Australian wealth protection, New Zealand and mature for capital efficiency and value, emerging embedded value as soon as possible.
  • Continue focus on costs to drive operational leverage.

AMP Chief Executive Craig Meller said:

“Our  strategy continues AMP’s shift from a product and distribution business to a  customer-led organisation focused on helping our customers achieve their  personal goals.”

“We are uniquely positioned to benefit from favourable domestic and global thematics including the mandated growth of the Australian superannuation system, a  growing banking market and the structural increase in demand for investment yield as the world’s population ages.

“The strategy is focused on realising our potential while adapting to an increasingly competitive market place and technology-driven disruption.

“In  Australia, we will continue to lead the wealth management market, changing the sector’s traditional economics by driving greater revenue from advice and self-managed super fund (SMSF) services.  We will help more Australians get more advice, more often through our transformed goals-based operating system.

“We will also diversify and drive revenue growth internationally through investment management, particularly infrastructure and real estate, and by extending our unique wealth operating system to offshore players.  Our partnerships with market leaders in China  (China Life) and Japan (MUTB) provide strong platforms for future growth.

“The approach for our Australian wealth protection, New Zealand and mature businesses is to manage them for value and capital efficiency.  These businesses have significant embedded value and we continue to look for ways to economically accelerate the realisation of this value.

“The  strategy will be underpinned by a continuing focus on operational efficiency  and cost discipline right across the group.”


$200m+ Refunds Due From Major Financial Advisory Firms – ASIC

ASIC says AMP, ANZ, CBA, NAB and Westpac have so far repaid more than $60 million of an expected $200 million-plus total in refunds and interest for failing to provide general or personal financial advice to customers while charging them ongoing advice fees.

These institutions’ total compensation estimates for these advice delivery failures now stand at more than $204 million, plus interest. As foreshadowed in ASIC’s Report 499 Financial advice: fees for no service (REP499), ASIC can now provide an update on compensation outcomes to date.


In October 2016 the Australian Securities and Investments Commission (ASIC) released REP499. The report covered advice divisions of the big four banks and AMP and described systemic failures to ensure that ongoing advice services were provided to customers who paid fees to receive these services, and the failure of advisers to provide such services. The report also discussed the systemic failure of product issuers to stop charging ongoing advice fees to customers who did not have a financial adviser.

At the time of the publication of the report compensation arising from the fee-for-service failures reported to ASIC was approximately $23.7 million, which had been paid, or agreed to be paid, to more than 27,000 customers.

Since REP 499 a further $37 million has been paid or offered to more than 18,000 customers. In addition, the institutions’ estimates of total required compensation for general and personal advice failures have increased by approximately 15% to more than $204 million, plus interest.

The table provides, at an institution level, compensation payments and estimates that were reported to ASIC as at 21 April 2017. Since that date compensation figures have continued to increase.

Group Compensation paid or offered Estimated future compensation   (excludes interest) Total (estimate, excludes   interest)
AMP $3,816,327 $603,387 $4,419,714
ANZ $43,818,571 $8,613,001 $52,431,572
CBA $5,850,827 $99,786,760 $105,637,587
NAB $4,641,539 $385,844 $5,027,383
Westpac $2,670,479 Not yet available $2,670,479
Total (personal advice   failures) $60,797,743 $109,388,992 $170,186,735
NULIS   Nominees (Australia) Ltd (1) Nil $34,720,614 $34,720,614
Total (personal and general   advice failures) $60,797,743 $144,109,606 $204,907,349

Source: Data is based on estimates provided to ASIC by the institutions and will change as the reviews to determine customer impact continue.

(1) For details, see the section on NAB below.

Key compensation developments


  • AMP’s total compensation estimate decreased from $4.6 million to $4.4 million as AMP reviewed customer files and data to determine compensation required, and revised its previous estimates.


  • The total compensation estimate has increased from $49.7 million to $52.4 million due to the expansion of existing compensation programs and the identification of further failures by authorised representatives of two ANZ-owned advice businesses:
    • Financial Services Partners Pty Ltd; and
    • RI Advice Group Pty Ltd.
  • The largest component of ANZ’s compensation program relates to fees customers were charged for the Prime Access service, where ANZ could not find evidence of a statement of advice or record of advice for each annual review period.
  • In addition, ANZ found that further compensation of approximately $7.5 million is required to be paid to ANZ Prime Access customers for ANZ’s failure to rebate commissions in line with its agreement with customers. This compensation has not been included in the figures in this media release because it does not relate to a failure to provide advice for which customers were charged, but is noted for completeness and transparency.


  • There has been no substantial change in CBA’s compensation estimate, which remains at approximately $105 million, plus interest, the majority of which relates to Commonwealth Financial Planning Ltd (CFPL). The compensation estimate for CFPL results from a customer-focused methodology whereby, as well as providing refunds where the adviser failed to contact the client to provide an annual review, CFPL will provide fee refunds to customers where:
    • the adviser offered the customer an annual review and the customer declined, or
    • the adviser tried to contact the customer to offer a review, but was unable to contact the customer.
  • Some of the other licensees or banks covered by the ASIC fees-for-no-service project have not, at this stage, adopted a similar customer-focused approach to the situation in which a service was offered but not delivered.  ASIC continues to discuss the approach to this situation with these banks and licensees.


  • Since the publication of REP 499, by 21 April 2017, NAB reported to ASIC the further erroneous deduction of adviser service fees for personal advice from more than 3,000 customers of the following licensees:
    • Apogee Financial Planning Ltd: $11,978, from 11 customers;
    • GWM Adviser Services Ltd: $179,446, from 290 customers;
    • MLC Investments Ltd: $9,755, from six customers;
    • National Australia Bank Ltd: $2,777, from seven customers; and
    • NULIS: $173,120, from 3,310 customers.
  • In addition, the table shows the expected compensation of approximately $34.7 million by NAB’s superannuation trustee, NULIS Nominees (Australia) Limited (NULIS), for two breaches involving failures in relation to the provision of general advice services to superannuation members who paid general advice fees (other fees referred to in this release relate to personal advice). As announced by ASIC on 2 February 2017 ASIC has imposed additional licence conditions on NULIS following these and another breach: ASIC MR 17-022. The failure was by MLC Nominees Pty Ltd (and MLC Limited for the first of the two breaches).  Whilst on 1 July 2016 the superannuation assets governed by MLC Nominees were transferred by successor fund transfer to NULIS, and on 3 October 2016 NAB divested 80% of its shareholding in the MLC Limited Life Insurance business, accountability for this remediation activity (including compensation) remains within the NAB Group. The estimate of customer accounts affected has increased from approximately 108,867 to 220,460 since REP 499, reflecting the second of two breaches.


  • REP 499 noted that Westpac had identified a systemic fees-for-no-service issue in relation to one adviser only, with compensation of $1.2 million paid in relation to those failures.
  • Following further ASIC enquiries, Westpac subsequently clarified that it has paid further compensation of approximately $1.4 million to 161 customers of that adviser and 14 further advisers, in respect for fee-for-no-service failures in the period 1 July 2008 to 31 December 2015.

Next steps

ASIC will continue to monitor these compensation programs and will provide another public update by the end of 2017.  In addition ASIC will continue to supervise the institutions’ further reviews to determine whether any additional instances are identified of fees being charged without advice being provided.


Customers who are paying ongoing advice fees for services they do not need can ask for those fees to be switched off. Customers who have paid fees for services they did not receive may be entitled to refunds and compensation, and should lodge a complaint through the bank or licensee’s internal dispute resolution system or the Financial Ombudsman Service.

ASIC’s MoneySmart website has a financial advice toolkit to help customers navigate the financial advice process and understand what they should expect from an adviser. It also has useful information about how to make a complaint.

Benefit payments rise dramatically ahead of July 1 super changes

AMP says SMSF trustees looking to take advantage of the current rules around non-concessional caps have significantly increased benefit payments, according to the latest SuperConcepts SMSF Investment  Patterns Survey.

In the March 2017 quarter the average benefit payment increased significantly from $16,256 to $27,900.

Overall contribution levels also continued to rise in Q1, increasing from $8,548 to $9,138.  This continues the trend established in Q4 of last year which saw contributions increase by 181  per cent following the Government’s confirmation that the proposed Super changes will come into effect on July  1, 2017. The rise, however, is a reversal of the historical trend where Q1 has always been the lowest quarter each year.

SuperConcepts Executive  Manager Technical & Strategic Solutions Phil La  Greca said the findings clearly demonstrated that SMSF  trustees were looking to maximise current non-concessional contribution rules.

The current $180,000 after-tax contributions cap, and the three-year  $540,000 bring-forward rule remain until 30  June 2017.

Commenting  on the new trend to emerge around benefit payments,  which almost doubled  mainly through the  increase in lump sum withdrawals,  Mr  La Greca said:

“Trustees are implementing withdraw and re-contribution strategies to take advantage of the window of opportunity before July 1. Strategies include making non-concessional contributions  into an accumulation account, starting  a new 100 per cent  tax free pension and making contributions to a  spouse to try  and  equalise member balances and  maximise access to the $1.6 million pension transfer  balance cap for both persons.”

During prior quarters the split of lump sum withdrawals versus pension payments tended to be around 20 per cent versus 80 per cent. In the first quarter of 2017 the split shifted to 40 per cent versus 60 per cent.

Asset allocations largely remained unchanged as SMSF trustees and their advisers focus on dealing with the opportunities around the upcoming changes.

The quarterly SuperConcepts SMSF Investment Patterns  Survey covers approximately 2,750 funds, a sample of SMSFs administered by Multiport (part of the SuperConcepts group)  and the investments they held at 31 March 2016.  The assets of the funds surveyed represent approximately  $3.2 billion.


AMP Q1 17 Update

AMP Limited today reported cashflows and assets under management (AUM) for the first quarter to 31 March 2017 and provided an update on its Australian wealth protection business.

  • Q1 17 Australian wealth management inflows increased 11 per cent from Q1 16 to A$6.4 billion. This was offset by a 19 per cent increase in outflows resulting in net cash outflows of A$199 million.
  • Outflows primarily driven by increased consolidation activity across the superannuation sector and as customers transitioned to MySuper.
  • Net cashflows on AMP retail platforms were A$188 million in Q1 17. North continues to perform well, with net cashflows up 27 per cent from Q1 16.
  • AMP Capital net external cashflows of A$228 million driven by strong cashflows from China Life AMP Asset Management.
  • AMP Bank’s mortgage book grew by 5 per cent over the quarter.
  • Positive Q1 17 Australian wealth protection claims and lapse experience, with the business performing in line with revised assumptions.
  • Cashflows strong since beginning of Q2 with wealth management net cashflows now positive year to date.

AMP Chief Executive Craig Meller said:

“Q1 17 cashflows reflect an extraordinarily high level of activity across Australia’s superannuation industry as customers transitioned to MySuper prior to 1 July 2017, consolidate their funds and allocate more investments to SMSFs, amid a changing regulatory environment. As a result, both Australian wealth management cash inflows and outflows were higher.

“Cashflows into North increased, reflecting our continued investment in the market leading platform. AMP’s SMSF business, SuperConcepts, also increased its assets under administration as it builds on its market-leading position.

“Wealth management cashflows have been strong since the beginning of Q2 as we near the 1 July 2017 effective date for superannuation contribution changes and from the transition of a large corporate super mandate to AMP. Final MySuper transitions were completed in April and net cashflows in wealth management are positive for the year to date.
“Q1 claims and lapse experience in Australian wealth protection indicate that the measures we’ve taken to stabilise the performance of the business are working.”

Generation Rent

A report by AMP says a major demographic shift in the US has contributed to a steady decline in home ownership since the Global Financial Crisis (GFC), with Generation Y dubbed Generation Rent as millennials delay purchasing a home in the suburbs in favour  of renting in the urban core.

A new AMP Capital whitepaper, Generation Rent, explores this trend, the  implications for real estate investors and the opportunities within the US apartment REIT sector.

AMP Capital Client Portfolio Manager for Global Listed Real Estate and report author Chris  Deves said: “The greater propensity for millennials to rent isn’t necessarily a surprise.  After all, this is the same generation that pioneered the ‘sharing economy’, a collaborative approach to consumption, which draws heavily  on the notion of renting.

“Millennials are opting for proximity to nightlife, restaurants and the workplace along with  access to shared spaces and amenities, which is translating into greater demand for rented apartments in the urban core.  As a demographic cohort, the  strong willingness of millennials to relocate in the pursuit of new career  opportunities necessitates flexibility and mobility, which is also more  conducive to renting over owning.”

The paper shows this is an important tailwind for US apartment REITs, which  make up roughly 8 per cent of the global listed real estate benchmark or more  than US$100 billion of equity market capitalisation.

“On a  through-cycle basis, this shift is a positive for residential landlords and, in  turn, a positive for investors in the listed institutional apartment operators,  which have asset portfolios with meaningful exposure to key urban centres.

“Apartment  REITs are generally high quality and consolidation in the sector has left a set  of large, well-capitalised companies with seasoned management teams, making  them attractive for real estate investors with a long-term investment horizon,”  Mr Deves said.

Mr Deves notes that millennials won’t, however, rent forever.  He said: “The  American dream of home ownership is not dead and buried.  Gen Y are just  as likely to head for the suburbs as previous generations, and starting a  family is often an important catalyst.  The key difference is that we are  seeing this occur increasingly later in life.

“Cyclical affordability issues and demographic change has and will support demand for  apartment rentals in city centres.  During the property cycle, the US  apartment REITs should therefore be in a stronger position to push rents, and quality management teams with insight into the needs of millennials will be  best placed to deliver value for investors of all sizes.”

While the story is similar for Australian millennials, investing in the US is the best way to play this trend for local investors as it offers the largest, highest quality, and most liquid set of listed apartment landlords.

Mr Deves said: “Australian investors should consider a global strategy for listed real  estate in order to access these kinds of thematics, which may not be as readily  investible in their local market.  A global approach also offers geographic diversification for the real estate portfolio.”


A disconnect between the growth objectives and asset allocation of SMSF trustees

Self-managed superannuation fund (SMSF) trustees have high growth expectations for the next 12 months yet as many as 55 per cent have moved to a more defensive asset allocation amid continuing market volatility, according to AMP Capital.

Statistics from AMP Capital’s latest Black Sky Report show that while SMSF trustees expect a 10.9 per cent return on their portfolio this year (6 per cent capital and 4.9 per cent income), only 18 per cent of trustees have made changes to position their portfolio for growth.  This is, however, an increase of five percentage points from 2015.

Further to this, nearly half of SMSF trustees surveyed for the report say their aim is to have a fully diversified portfolio yet more than 50 per cent of their portfolio is invested in just one investment type outside of managed funds.

AMP Capital Head of Self-Directed Wealth and SMSF Tim Keegan said: “If trustees continue to be exposed to significant portfolio concentration risk and remain in more defensive assets without seeking financial advice, they may struggle to achieve their retirement goals.”

AMP Capital’s Black Sky Report is developed each year to provide a snapshot of trustee investment trends.  It also helps to arm financial advisers with insight and knowledge of where SMSF trustees are looking for specific advice.

The 2017 report has identified the biggest investment challenges for SMSF trustees as market volatility (according to 18 per cent of trustees surveyed), investment selection (11 per cent) and regulatory changes (10 per cent).

Mr Keegan said: “It’s clear that many SMSF trustees need help especially around portfolio construction and understanding the regulatory changes that are coming into play.  With nearly 60 per cent of SMSF trustees remaining open to using the expertise of a financial adviser, it’s clear this is a huge opportunity for advisers to tap into.”

The research also revealed that SMSF trustees continue to find managed funds attractive, with 47 per cent each investing approximately $280,000 in them.  Thirty per cent of SMSF trustees made their most recent managed fund investment after receiving advice from their financial planner.

Mr Keegan said: “There is an increasing appetite among SMSF trustees to invest in Australian equity funds, both active and passive.  Advisers can be proactive in recommending high-quality unlisted managed funds as well as introducing trustees to the increasing range of active exchange traded funds that are now available on the market.”

Active ETFs replicate managed fund strategies but are able to be bought and sold during the trading day like any share on the Australian Securities Exchange.  AMP Capital, in alliance with BetaShares, launched three active ETFs during 2016: the AMP Capital Dynamic Markets Fund, the AMP Capital Global Property Securities Fund and the AMP Capital Global Infrastructure Securities Fund.

According to Mr Keegan: “With expectations for growth at an all-time high, regulatory uncertainty at its peak and new products such as active ETFs becoming increasingly popular, there is more need than ever for SMSF investors to turn to financial advisers for support.”

For the third year in a row, AMP Capital has released the Black Sky Report, which uses research and data from leading research house Investment Trends to uncover the latest SMSF investor trends and insights.

The research is based on a quantitative online survey of nearly 800 AMP Capital SMSF investors conducted by Investment Trends.  The 2017 Black Sky Report can be downloaded here.