AMP cuts hidden fees from financial advice
AMP Financial Services is doing away with inbuilt fees and commissions from its investment products.
From July next year, the wealth manager’s 350 financial advisers will instead negotiate a set fee or hourly rate with their clients for the advice and products they provide.
Managing director Jack Regan said the change would give investors more certainty about the fees and charges on their investments and nothing about pricing would be hidden from investors.
“Advice and service fees will be clearly stated upfront, giving investors every confidence they will know the services they are to receive and what they will pay for them,” he said.
Although AMP has made a similar change to its commissions on investment products in Australia, Mr Regan said there was no pressure to follow suit here.
Instead, the changes followed publication of the AMP Financial Services Remuneration report, revealing investors were more likely to trust and seek advice from a financial adviser if there were higher levels of transparency around adviser fees.
Just on 72% of 500 investors who were interviewed by Colmar Brunton for the report said they were more likely to seek advice from a financial adviser if the fee structure was more transparent.
Just under 60% preferred a fee-for-service-based payment method and more than half said the customer should be able to negotiate fees with the financial adviser.
The average upfront fee suggested for a basic financial plan, including investment advice, was $320, which may not cover costs for the financial adviser.
AMP has New Zealand's largest national financial adviser network with more than 350 AMP advisers nationally who collectively write about $700 million of business each year reviewing finances, crafting financial plans and advising on insurance cover, retirement savings including Kiwisaver and investment options.
Investors in AMP’s Kiwisaver scheme will continue to pay an inbuilt service fee.
Mr Regan said the new fee scheme could see fees vary considerably across AMP's adviser network.
Across the Tasman, AMP's advisers had reported an rise in average incomes per client under this model.
"Once the conversation about value is resolved, people are actively saying, I'd like some more of that advice," said Mr Regan.
It was unlikely the life insurance industry would follow suit and strip inbuilt commissions from its products, he said.
"You don't say never, but it's hard for me to see that changing anytime soon."