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Does Rhombus provide a template for AMP?

Mike Taylor29 July 2024
Balloon breaking away

ANALYSIS

Significant adviser attention will be focused on Insignia Financial’s full-year results next month to see what value it attributes to its 37% stake in Rhombus Advisory because that, in turn, will provide a guide to any similar moves by AMP Limited.

It is no secret that AMP Limited has been looking at implementing a similar strategy to that of Insignia with respect to its financial advice business and AMP managing director, Advice, Matt Lawler, recently used Financial Newswire’s Advice, Wealth and Super: Rewired Conference to declare there are significant cost benefits if the advice business sits outside of AMP.

It is worth noting that Insignia chief executive, Scott Hartley, was right across AMP’s plans for its financial advice businesses as AMP’s wealth management CEO before he departed the company amid its 2023 restructure.

The level of interest in the Insignia full-year accounts will be the degree to which the creation of Rhombus impacts the overall Insignia bottom line in circumstances where, previously, the overall advice business was struggling to break even.

Insignia’s previous chief executive, Renato Mota used the company’s 2023 full-year results to point to the development of what has become Rhombus as “transformational”.

“This is a transformational initiative for our Advice offering and will accelerate the return to profitability of our Advice business, while ensuring our Advice Services model is positioned for sustainable growth,” he said.

But the question on the minds of the RI Advice and Consultum advisers holding equity stakes in Rhombus in what those stakes are worth.

AMP is similarly challenged in terms of returning its advice business to break-even and then profitability and Lawler was pragmatic about the cost-savings that come with sitting outside a major company.

“There is a cost to being inside a company like AMP. It has an APRA-regulated fund, it has a bank and a super fund so therefore all those regulator requirements apply to an advice business like us whereas no other advice business will have that applied to them. And it is a significant cost,” Lawler said.

“There are also other costs associated with being inside a big institution like AMP and anyone who has worked inside a big institution will know this concept of shared allocations or group allocations are the bane of everyone’s life.”

“They are large [costs] in a group like that where we are neither users of the services nor want the services but you get allocated the services,” he said. So that’s why we think a future outside of AMP might be the right one with AMP still involved but potentially outside AMP with other investors coming into the business as well.”

Mike Taylor

Mike Taylor

Managing Editor/Publisher, Financial Newswire

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Peter Swan
6 months ago

Something that cannot make money is offloaded by a large insto to small business owners. Nicely done. Why an adviser would want to own an unprofitable asset discarded by an insto is beyond me.

Researcher
6 months ago
Reply to  Peter Swan

Agreed, see how there is nothing mentioned about the benefits to advisers of breaking away from AMP, it is simply about cost savings for the advice arm. These cost savings will be used to move a unprofitable business line to break even (maybe), with no intention to pass any cost savings onto advisers whose fees have been significantly increased over the past few years.

Last edited 6 months ago by Researcher