Most of the recommendations the commission has made that impact AMP (beyond the massive stream of remediation costs and the program investment to support that process) don’t affect it directly, although the investment in upgrading its risk and compliance functions will be material.

Loading

There are, however, likely to be significant flow-on costs and consequences from Hayne’s recommendations that affect financial advisers.

Grandfathered commissions are to be abolished by January 2021. There are estimates that will cost AMP’s advisers about 20 per cent of their aggregated revenue base. Inevitably it will lead to an exodus of older advisers and some (further) leakage of AMP’s funds under management.

For both the advisers and AMP there will be increased costs from the requirement to seek clients’ agreement to ongoing fee arrangements annually, as there will be from measures to improve the quality of advice and the professionalism of advisers.

More onerous obligations on financial service licence holders to act in the "best interests’’ of clients and detect and report misconduct will, with the requirement for advisers to disclose any lack of independence or impartiality, also impact the advisers and flow through to some degree to AMP.

The severe limitations on the deductions of fees for advice from MySuper accounts and the recommendation that new superannuants should have one default account that would travel with them through their working life will also have an effect on AMP’s revenues and assets under management.

Loading

There’s also, of course, the unpleasant reality that AMP is represented among the 24 institutions and individuals that Hayne has referred for potential criminal or civil prosecution.

It is inevitable that there will be consolidation among the advisers in the sector as they pursue scale to absorb the increased costs and meet the requirements of a more onerous and intense compliance regime.

The pressure for scale as well as the focus on greater transparency in relation to independence, or lack of it, could have both positive and negative impacts on AMP.

Loading

It has the scale and the margins to absorb the increase in costs and could be a consolidator, albeit at some cost to those margins. In not dissimilar circumstances in the UK, there has been dramatic consolidation benefiting the bigger players.

The focus on independence and, in the light of the issues within its advisory networks, a probable emphasis within AMP on salaried rather than aligned advisers, could change the nature of its distribution towards a more direct model over time.

With the threat of vertical disintegration behind him, new CEO Francesco De Ferrari has been quick to deliver a new group structure, appointing a former colleague from Credit Suisse, Alex Wade, to lead the group’s key wealth management division among other senior executive changes.

The next big step in the re-making of AMP will come with the completion of its controversial, and complex, deal to sell its life and mature businesses to the UK’s Resolution Life for $3.3 billion. That deal should complete mid-year.

Loading

A recent AMP update revealed the businesses being sold lost about $105 million in the December half and that AMP will have to reserve another $100 million of capital within them until the sale.

Fortunately for AMP shareholders, Resolution is exposed to almost all of the losses within those businesses from July 1 last year. AMP will also in effect recover the $100 million of extra cover as additional profit from the sale.

That update disclosed how poor the performance of those businesses continues to be and provided an insight into how they might have continued to soak up AMP’s capital had it not decided to sell them.

The terms of its exit have been heavily criticised, even though AMP flogged the businesses around the world and Resolution’s was the most attractive offer. Retaining them and running off the life book meant retention of an exposure to their continued deterioration and capital requirements.

There are efforts being made by some institutions to drum up support for a vote against AMP’s chairman, David Murray, at the annual meeting in May. If they were successful, that would probably also lead to the loss of the highly respected Mike Wilkins, given that he was acting CEO and led AMP’s exit from its legacy businesses.

The last thing AMP needs, given the range of challenges it faces, is another bout of board instability ignited by shareholders protesting a deal the board believed was not only the best available but in the long-term best interests of shareholders.