It's gone very quiet as the Financial Services Royal Commission took a well-earned breather from the excitement and revelations of the past couple of weeks, with Round 3 of the Public Hearings not due to begin again until 21 May. However, in the background the AMP machine (minus CEO, Chair and Legal Counsel) has been busy producing their response, mainly denying or refuting the allegations levelled against them.
For those not wanting to wade through the full 27 pages and 101 points in AMP's submission, here's a 4 page Fact Sheet summarising their response.
In the meantime of course the public fallout has been dramatic, and in spite of AMP's response and denial, necessary. However, the outcomes - both in the short, medium and long term remain to be seen. Here's Hedge Clippings' quick take:
Short Term:
- AMP's AGM next week will be a cracker!
- AMP's reputation has been irreparably damaged. How long, and what it will take to recover it, is anyone's guess.
Medium Term:
- Expect more divestment of Banks' wealth divisions (with the exception of "private wealth"). NAB has flagged the spin-off of MLC, ditto ANZ, with CBA examining disposal of Colonial. However, this will only separate the banks from the platforms. The Product Issuer, Platform and the Advisor network model will most likely remain in place but under new ownership.
- Expect an exodus of bank aligned (and AMP) advisors to truly independent groups to gain independence from their current restricted approved product lists.
- Expect Investors, faced with having to pay for advice, will avoid visiting a financial advisor even more than they do now, which while it will help some, will unfortunately not necessarily benefit their financial future.
Longer Term:
- Vertical Integration to come under pressure and possibly be abandoned. The big banks' and AMP's vertically aligned platforms are reportedly losing market share, while industry evidence suggests that only 20 to 25% of SMSF's and self-directed investors use them - either due to cost, or the fact they don't seek the services of a financial advisor.
- Bank culture itself may or may not change, but the headcount, and the pecking order, of their internal compliance departments almost certainly will.
Meanwhile it remains to be seen if the findings of the Royal Commission, when eventually handed down and pondered over by the authorities, and then argued over through the courts, will actually result in any successful prosecutions, particularly at senior or board level.
