AMP has recognised some of its older style products are past their use by date and are offering customers the opportunity to migrate across to its flagship Savings and Investments Portfolio (SIP) range of funds.
In an operation, codenamed Project Morph, AMP is suggesting its 80,000 Investment Linked (IL) Savings Plan customers (who account for more than $800 million of funds under management) move to SIP funds. Part of the offer includes unbundling the life insurance portion of the Investment Linked plan.
It says the older products with high up-front fees were designed for a different time.
"For most of our customers there are significant benefits in migrating," AMP deputy general manager Peter Carr says.
Included in the list of benefits are greater flexibility, lower fees and a wider range of managers to choose from, and increased life cover with reduced underwriting.
While AMP is suggesting customers switch products the move isn't mandatory. In fact some of the longer-running older style products are doing very well.
IPAC Securities has looked at the differences between the two plans and concluded there are only marginal differences in terminal values for SIP and IL plans
One significant difference is that it is easier for investors to withdraw their money from SIP funds than from IL contracts.
It says the offer is better geared to those investors with shorter time horizons. The main reason for this is because over time the compounding effect of lower annual management fee outweighs the benefits of the reduced vesting period and abolition of the annual policy fee.
IPAC says the crossover point is around the 12-year mark.
Project Morph was launched earlier this year and it is expected to run for up to four years. To date 7000 investors have made the switch.
Carr says that with Project Morph AMP is "trailblazing for the industry."
"I don't have any doubt the industry will follow what we are doing," he says.
The plus for AMP advisers is it gets them in front of their clients again, and in many cases promoting Project Morph has resulted in new business.
AMP has recognised some of its older style products are past their use by date and are offering customers the opportunity to migrate across to its flagship Savings and Investments Portfolio (SIP) range of funds.