AMP Ltd.'s wealth management business was hit by net cash outflows in the first half ended June 30, after a public inquiry revealed alleged misconducts of its financial planners.
The company's net cash outflows for the first six months of 2018, which included client redemption, reached A$873 million, according to its earnings presentation released Aug. 8. The company reported net cash inflows of A$1.02 billion a year earlier.
"We are expecting those conditions to continue in the second half," acting CEO Michael Wilkins said in a post-earnings conference call on the same day.
AMP is facing multiple lawsuits after the public inquiry, known in Australia as the Royal Commission, found that the company's financial planners allegedly overcharged for financial advice, among other misconducts. The Australian Securities and Investments Commission has taken AMP to court over alleged failure to ensure its financial planners comply with the best interest duty and related obligations under the Corporations Act. The company is also facing a few class-action lawsuits.
To regain customer confidence, AMP plans to cut fees for around 700,000 customers of the company's flagship superannuation investment service starting the third quarter, Wilkins said. The company also plans to accelerate compensating customers for poor or nonexistent financial advice, he said.
The company recently named John Fraser, former secretary to the Australian treasury, a nonexecutive director on its board, which is seen as another step to rebuild the company's reputation.
In the six months ended June 30, the company set aside A$290 million as post-tax provision for potential advice remediation, A$13 million for preparing responses to the Royal Commission and A$19 million as portfolio review cost.
Provisions and compliance costs weighed on AMP's first-half result. Its first-half net profit declined 74.2% to A$115 million from A$445 million in the year-ago period.
Wilkins added, despite higher regulatory costs, the company is on track to keep its controllable costs within its end-2018 target of A$950 million.
Excluding its AMP Capital asset management unit, controllable costs dropped by around 10% to A$427 million in the first half from the year-ago period partly due to improved efficiency.