AMP Wealth Clients Pull $648 Million as Scandals Take Toll
(Bloomberg) -- AMP Ltd.’s wealth customers withdrew A$873 million ($648 million) in the first half as the Australian asset manager was hit by revelations of misconduct.
The net cash outflows in the six months to June 30 compared with inflows of A$1.02 billion a year earlier, the Sydney-based company said in a statement Wednesday. Withdrawals in the second quarter were impacted by an inquiry into wrongdoing in the financial industry and “headwinds” remain for the rest of 2018.
“The events around the Royal Commission into financial services have challenged our reputation,” acting Chief Executive Officer Mike Wilkins said in the statement. “While we continue to monitor the impacts, we have taken action to stabilize the business.”
AMP has been shaken after the inquiry heard the 169-year-old company repeatedly misled the regulator over charging customers fees for services they didn’t receive -- conduct that may lead to criminal charges. The stock has lost more than a third of its value in the past year and Chairman Catherine Brenner and CEO Craig Meller both resigned.
Its first-half underlying profit dropped to A$495 million from A$533 million a year earlier after it said July 27 that it would take a A$290 million charge to compensate customers for poor or non-existent advice. The fee reductions AMP announced recently for wealth management clients will reduce revenue by A$12 million in the second half and by A$50 million a year from the 2019 financial year.
Net profit fell to A$115 million from A$445 million a year earlier.
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The company has been served with five class actions since April by investors alleging AMP breached its continuous disclosure obligations. It has filed a defense to one and intends to “vigorously defend” the others.
AMP appointed former Secretary to the Australian Treasury John Fraser as a non-executive director, effective from September. The company will pay acting CEO Wilkins A$1.46 million, including pension, to Dec. 31 with an additional payment of A$70,100 for acting as executive chairman from April 30 to June 20. The new chairman, David Murray, who assumed the role June 21, will receive an annual payment of A$850,000 including pension.
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