New CEO's Big Task at AMP Laid Bare in Internal Research Report
(Bloomberg) -- The size of the challenge facing AMP Ltd.’s new Chief Executive Officer Francesco De Ferrari in repairing the wealth manager’s battered reputation has been laid bare in an internal research report detailing the “grim” impact of months of turmoil.
The 169-year-old company has been the biggest casualty of an inquiry into misconduct in the financial system, known as a Royal Commission. The firm has admitted to misleading regulators over charging customers fees for services they didn’t receive, which may lead to criminal charges. The revelations led to the ouster of the previous CEO and chairman, customers have pulled hundreds of millions of dollars from its funds and the shares have tumbled to a record low.
“AMP’s fall from grace has been greater than the banks,” said the report, which was obtained by Bloomberg News. “AMP’s highly visible management turmoil made its wrongdoings feel more systemic, serious and intentional than others involved” in the Royal Commission, says the 51-page presentation, dated August 2018 and titled ‘Rebuilding Trust.’
De Ferrari, a 17-year Credit Suisse Group AG veteran who most recently led the firm’s Asia-Pacific private bank, will take the helm Dec. 1. The father-of-five has “deep experience in dealing with remediation stemming from regulatory issues,” Sydney-based AMP said when announcing his appointment Wednesday.
Key among his tasks will be repairing the reputational damage wrought by the revelations of wrongdoing.
Research contained in the document shows AMP’s public reputation has dropped by a “huge” 16 points in the past three months after a decade of stability, and is now “significantly” behind comparison companies, including the big four banks. AMP confirmed the contents of the report.
“We understand and have acknowledged publicly that the Royal Commission has had a significant impact on AMP,” a spokeswoman for the company said. “We have already taken actions to start to rebuild trust in AMP. We intend to do more work to win back the respect of our community.”
The interim report has been seen by only a small number of people within the company, and De Ferrari hasn’t seen the findings, the spokeswoman said.
“Once the Royal Commission is over, we can draw a line in the sand under the bad news with the new CEO appointment,” the presentation said, suggesting this is an opportunity for a “clear re-set” and to balance problems of the past with “optimism and excitement about moving forward.”
The Royal Commission is scheduled to release its interim report next month. Public hearings will finish later this year and a final report released in February.
The damage has been compounded because AMP’s previous public image was of a conservative, straight and moderately successful company which wasn’t “ruthless or making obscene profits,” the research says. Consumers expect to see “dramatic changes” from the wealth manager and a response “equal to the damage done.”
Founded in 1849 as the Australian Mutual Provident Society, AMP was owned by its policyholders until it listed on the Australian Stock Exchange in 1998.
What AMP customers said in the focus groups:
The reputation scores are also impacting perceptions of its products, with a steep decline in customer preference for its retirement solutions, according to the report. In the first half of the year, AMP’s wealth customers withdrew A$873 million ($636 million) compared to inflows of A$1.02 billion a year earlier, according to data released in July.
“Customers and shareholders need to feel good about AMP again,” says the report. “For those who have stuck with us, they desperately want reassurance that they have made the right decision.”
The document suggests that AMP now focus on reinforcing its “Australianness” and concentrate on supporting community activities, as well as considering new large mass-appeal sponsorships, such as the Australian Olympic team for Tokyo.
The findings are based on two surveys: AMP’s proprietary twice-yearly brand-tracker survey of approximately 2,000 consumers in May and June, and an online survey by the Reputation Institute between May 23-June 5, which garnered 3,686 responses screened to have a “high familiarity” with the company.
AMP also commissioned a research firm to hold eight focus groups, each comprising six to eight customers, shareholders and consumers in Sydney in June.
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