Ares’ interest in AMP – and AMP’s controversial decision to announce it to the market – was a life ring for shareholders and management alike. After a year of scandals and outflows, here was an opportunity to turn things around. Now it’s all but gone, save for a glimmer of hope around AMP Capital.
AMP must push on with the turnaround strategy first conceived in the wake of the royal commission, to which Ares’ offer was seen – if not within, then outside AMP – as a clear alternative. But two things aren’t well understood. One, whether the turnaround strategy will actually be successful. And two, what will happen if it’s not.
On question one, it’s probably too early to say. AMP’s management has successfully simplified its business through the sale of the life division and has a clearly articulated goal for the revamp of wealth management. Further, Ares wasn’t interested in AMP Capital for no reason – and they might still buy it. Much of the negative buzz around the company has been due to a string of unfortunate headlines, and this has clouded perceptions of CEO Francesco De Ferrari, who has otherwise proved to be a capable leader despite fumbling his response to accusations hurled at Boe Pahari. One imagines that in an alternate universe where top executives weren’t caught in a string of scandals and COVID-19 didn’t happen we might be having a very different conversation about AMP’s prospects.
On question two – that’s anybody’s guess. Can the beleaguered wealth manager continue to putter along, presumably under new leadership who will themselves have a new turnaround strategy? Or are the problems posed by a potential failure more existential in nature? The sale or partial sale of AMP Capital could do wonders to mollify shareholders and would leave AMP to concentrate primarily on its problem child advice division. However, it remains unclear whether AMP can cut through the Gordian Knot of providing advice at low cost to the masses. Post-Hayne perceptions of the adviser base will also work against them here.
Selling AMP Capital could be a quick victory, and just what Mr De Ferrari needs to win back the faith of long-suffering shareholders. But that victory could soon turn out to be an empty one if his turnaround strategy turns out to be a dud.
