The AMP Ltd (ASX: AMP) share price continues to face pressure as it drops below a dollar per share for the first time. Is there any way out for the embattled AMP share price?
AMP share price
AMP’s status to date
It seems the market’s expectations of AMP’s future took a hit after posting its half-year results last month. In summary, AMP recorded falls in profit across its Australian wealth management and AMP Capital divisions but this was offset by jumps in New Zealand wealth management and banking services.
AMP’s wealth management segment in Australia continues to be the biggest pillar, making up 44% of total revenue for HY21. AMP generates revenue in this segment from financial advice services to optimise members’ wealth.
You could say its wealth management arm was the biggest driver of growth in the past.
However, this is no longer the case given the adverse impact of the Royal Commission findings. These findings have led the government to tighten the screws on the regulation of financial advisers.
As a result, the government and regulators decided to raise the standards through a more stringent application process and lifting reporting requirements as well as many other obligations.
The greater burden imposed on financial advisers has caused a significant exodus, contributing to the gradual decline in wealth management revenue for AMP.
Last Thursday, Wealth Data released numbers showing the total number of advisers shrinking by 1,649 since the start of 2021. AMP and its competitor, IOOF Holdings Limited (ASX: IFL) experienced the biggest losses with 279 and 401 respectively.
Adviser Ratings predicts the number of exits to snowball in the future based on recent trends.
My take
The AMP business reminds me of a weakening hull in a big ship.
On the left side, you have one set of pirates attacking the hull in the form of financial advisers exiting the industry. On the other side, you have a ship of regulators continuing to report and dish out punishments for previous failures.
The back and the front sides of the ship, being the banking and New Zealand wealth management services are trying their best to steer the ship out of a heated environment.
As per the Rask Investment Philosophy, I’d prefer to invest in businesses that are not facing such strong headwinds.
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