AMP's lackluster net flows are surprising given that nearly all of its accounts belong to members under 65-years old and core employer super contributions have been steady at $4 billion per year for the past five years.
Given this, annual inflows should be closer to $19 billion, according to a top insurance analyst. This underlines AMP's poor first quarter where it recorded net outflows of $199 million.
At AMP's inaugural investor day next Friday (26 May), AMP executives will be forced to answer tough questions on how they plan to fix up the Aussie markets main pure wealth play.
With super forecast to double to $4 trillion in 10 years, the key is having customers engaged and using AMP as the primary SG (superannuation guarantee) account where 9.5 per cent of wages are contributed week in week out.
"AMP's position is robust and arguably its biggest opportunity is its existing customers,” argued Morgan Stanley’s Daniel Toohey who, after examining account demographics and AMP's core employer compulsory and member voluntary super inflows, calculated that 92 per cent of AMP's 3.6 million accounts are for under 65-year olds. Further, reported retention for funds under management is 90.4 per cent.
“So, leveraging this strong footprint to capture SG flows is key to igniting growth,” he noted.
From where he sits, AMP has digitised the platform, profiled its customers and is using data event triggers, but engaging customers and expanding share of wallet remains challenging.
Despite the work on re-engaging customers, new contemporary offers and more competitive pricing in recent years, Toohey went on to say, AMP's core SG flows have remained stable over last 5 years at $4 billion per annum. This despite the SG rate jumping from 9.0 per cent to 9.5 per cent three years back.
“While AMP's market share in overall accumulation and pension is broadly flat year-on-year in the 'retail' segment, the transition to MySuper has seen small and middle market corporates put their super to tender with AMP's share falling 3 per cent in 2016.”
However, Toohey is optimistic that, with MySuper-driven transitions ending in April 2017, flows should normalise.
The big problem for wealth managers though is that while four-out-of-five people want advice, only one-in-five actually seek it and the same may be true for AMP's customers' engagement with super.
“The risk to AMP seeking to become the primary account for customers is further account attrition or potential fee squeeze to retain. But doing nothing is not an option. Longer run, regulation could drive account consolidation into the active SG account, as was originally intended as part of the simple super movement," he said.
Meanwhile, all eyes now are on second-quarter flows. Here, Toohey is pushing the impact of those customers who have one last opportunity to make up to three years of non-concessional contributions to their super to $540,000 before July 1.
"AMP theoretically should be well placed to benefit from the catch-up rule with 60 to 64 year-olds sitting in the preretirement sweet spot," he said. "But with average account balances in the core AMP Superannuation Trust for 60 to 64 year olds at only $40,000, the question is does AMP have the primary relationship to influence these customers?”
Investors are also expected to ask executives about robo-advice and its potential to streamline costs, improve productivity, strengthen compliance and address untapped market segments especially in the important $100,000-plus and millennial segments.
“Around 91 per cent of AMP's super accounts customers are in the $100,000 segment and 24 per cent are millennials. As such, AMP's incumbency, and brand with the right digital tools, well packaged and executed presents a substantial opportunity,” Toohey said.
Other questions will include whether AMPs new interactive advice model will drive planner productivity and profitability and whether AMP’s specialist managed account platforms are winning market share.