An avalanche of bad news from the Royal Commission has continued to smash AMP’s (ASX: AMP) business model, with massive outflows from its superannuation business.
Investors sucked almost $4 billion of cash out of AMP’s wealth management business last year, with much of that believed to have been reinvested with industry superannuation funds.
In a worrying sign the outflows appear to be getting worse, with the fourth quarter of 2018 the highest for outflows at around $1.6 billion.
That followed the September hearings of the Royal Commission, which raised severe concerns about the level of fees AMP was charging, sometimes for financial advice that was never delivered.
AMP lies to regulator
AMP was also revealed to have misled the regulator ASIC that it was paying those fees back to investors even as it continued to drag its heels and do nothing.
Outflows were around $1.5 billion in the third quarter of 2018 and a similar level is expected in the first quarter of 2019.
Overall, AMP’s results took a massive hit, with net profits sliding 97% from $848 million to just $28 million for the year.
Much of that hit came from the $469 million AMP had to set aside during the year to compensate customers who were charged fees for no service or received poor advice.
Underlying result not as bad
The underlying situation which stripped out those one-off charges was better, showing a 35% fall to $680 million for 2018.
That better underlying figure came from resilient performances by AMP Capital and AMP bank.
AMP chief executive officer Francesco De Ferrari took up the position in late 2018 after the departure of former chief executive officer Craig Meller and chairman Catherine Brenner in the wake of the fees for no service scandal.
He said the royal commission “has been a confronting but valuable experience for the financial services industry and has served as a catalyst for change at AMP.”
“We have undertaken board and leadership renewal, accelerated client remediation and sharpened our focus on delivering better value to customers including reducing fees on our MySuper products.”
AMP’s final dividend is $0.04 a share, taking the full year dividend to $0.14.