🚀 AI-picked stocks soar in May. PRFT is +55%—in just 16 days! Don’t miss June’s top picks.Unlock full list

Australia's AMP under pressure as pension clients exit

Published 10/05/2019, 01:22 PM
Updated 10/06/2019, 01:34 PM
Australia's AMP under pressure as pension clients exit
KO
-
AMP
-
MTS
-
Caltex Australia Limited
-
WOW
-
CCA
-

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)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.