Breaking News
0

Australia's AMP under pressure as pension clients exit

Stock MarketsOct 06, 2019 01:34PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

By Paulina Duran

SYDNEY (Reuters) - Australia's AMP Ltd (AX:AMP) has lost at least one major pension contract while other companies are reviewing their relationship with the wealth manager, which has struggled to stem a client exodus following revelations of serious misconduct.

Two sources told Reuters that grocery wholesaler and distributor Metcash (AX:MTS) had dropped its long-term pension contract with AMP, while other client and market sources said at least four other companies were reviewing their contracts.

Coca-Cola (NYSE:KO) Amatil Ltd (CCA) (AX:CCA), an AMP client since 2005, confirmed its mandate was currently out to tender.

All the sources requested anonymity because the information is not yet public.

Under Australia's compulsory pension system, companies must select a "default" pension fund to receive 9.5% of a worker's salary if the worker does not nominate their own fund, representing strong fee income to the selected wealth manager.

In the last 12 months, more than 10 companies have removed AMP as their preferred fund, including apparel retailer Glassons and Australia Post, and switched to rival AustralianSuper, a source with direct knowledge of the mandate changes told Reuters.

The exits follow harsh criticism of AMP at a government-ordered Royal Commission inquiry into misconduct in the financial sector. AMP was singled out in evidence for wrongfully charging fees to clients and attempting to mislead regulators.

The reputational fallout and an unusually large number of ongoing reviews by long-term clients has weighed on AMP's share price, which has lost two thirds of its value over the past 18 months.

AMP said in an emailed statement on Thursday that the "significant majority" of major clients that have formally reviewed their mandates over the past year had stayed with AMP.

AMP "supported" more than 53,000 large and small Australian businesses with their employees' superannuation arrangements, the statement said.

AMP last month told the market it had retained more than 20 large corporate mandates, without adding details.

Grocery retailer Woolworths (AX:WOW), one of AMP's largest corporate clients, had retained its mandate following a recent review, while oil supplier Caltex Australia (AX:CTX) also remained a client, sources said.

CLIENTS DRIVE HARD BARGAIN

Still, the exits are being used by some clients to drive a better bargain, putting further pressure on AMP's already shrinking margins.

"AMP is trying very, very hard to keep our business," said one executive whose company is reviewing a pension mandate. "We will consider what they have gone through and their brand, but if we stay it will be on a substantially better deal."

AMP's flagship wealth management unit reported A$3.1 billion ($2.1 billion) in net outflows, 13% of which were from its corporate superannuation business, in the six months to June. It forecast further corporate outflows of about A$700 million in the short term.

Morningstar estimated the unit has seen net outflows worth close to 4% of assets under management since the Royal Commission started uncovering poor business practices in mid-2018.

Metcash, which has more than 6,300 employees, has replaced AMP with appointed SunSuper, the two sources with knowledge of the mandate said. Metcash and SunSuper declined to comment. The size of the mandate has not been disclosed.

($1 = 1.4806 Australian dollars)

Australia's AMP under pressure as pension clients exit
 

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email