Neither AMP nor Insignia are profitable advice businesses
Australia’s two largest financial planning licensees – Insignia Financial and AMP Limited – are not providing financial advice profitably.
The two companies have confirmed in updates provided to the Australian Securities Exchange that they are yet to achieve “break-even” in their financial planning businesses despite significant restructuring efforts over the past two years.
Insignia reinforced this fact in its third quarter update provided to the ASX yesterday in which it stated that: “Insignia Financial remains committed to achieving break-even in the Advice Services channel and to delivering overall profitability in Advice”.
For AMP, its chief executive, Alexis George used her address to the company’s annual general meeting in late March to cite as a major achievement that “in our Advice business we successfully drove down costs for the second year in a row and more than halved the losses in the business”.
“Continuing to drive our Advice business towards break-even is one of the businesses’ highest priorities and good progress to be made,” she said.
The common bottom line for both Insignia and AMP is that they have driven down the number of advisers directly employed within their organisations while driving up those who are self-employed and self-licensed.
This is against the background of Insignia stating that it was maintaining active advice relationships with 1,483 financial advisers of which just 242 are directly employed by the company and the remainder are self-employed or self-licensed.
This compares to AMP which in February was reporting that it had just 112 employed advisers and 924 aligned advisers.
Both Insignia and AMP have indicated heavy reliance on the performance of their platforms, with AMP positioning its North platform to attract more business from independent financial advisers (IFAs) while Insignia is in the process of refining its platform offering around Evolve.
The only reason product companies have advice licensees is to funnel money into their products. They aren’t meant to be profitable in their own right. They are a marketing expense.
Everyone knows that except the Regulators..
What happens when you support the intrafund “advice” scam, & impose the world’s worst practice red tape of Annual Fee Renewal Consent forms, that only exist in Australia
Clearly they are not charging fees that cover the costs of doing what they are doing.
Subsidising advice with platform profits is not [supposed to be] a sustainable business anymore.
As well as removing some of the unnecessary red tape compliance, maybe getting rid of some of the many snouts in the trough would help too.
Cost of compliance in the Australian advice industry is suffocating profitability for all major and minor players – that’s obvious. Killing FUM and even the Life Insurance sector. Advisors exiting with plenty more to hit the road in 2026. Pretty poor outlook! Public servants should give themselves a good pat on the back – disgraceful!
Product should not be subsidising advice in 2023, the government is gutless to let this level of vertical integration continue. The heads of both groups are extremely vocal and prominent in lobbying to improve the advice environment and yet they are both paid from the proceeds of product. This is still a glaring conflict and stands in the way of all advisers credibility, if they advice cant wash its own face, stop doing it!
The reality is they have extremely bloated compliance teams to cope with the targeting from regulators that smaller dealer groups don’t have to deal with. It’s not an ideal situation and they are far from perfect but I don’t think it’s a sign of product subsidizing advice to get FUM like the bad old days. It’s a sign that the regulatory environment that’s been created is completely unsustainable.
Advisers are certainly paying Licensees enough that they should be profitable, if only they didn’t glut themselves on Compliance and Education teams, who are making the industry less efficient, and less client friendly.Cull the Compliance i say!
I’d be interested to know if any large super funds can attest to running profitable in-house advice businesses. If not there are some serious sole purpose test questions begging to be asked.