The new offering has many new features including being scalable from the adviser who specialises in regular, drip feed accumulation business through to advisers with more sophisticated, high-net worth clients who want to use a range of single sector funds.
AMP manager of investments and products, Richard Flinn, says compared to SIP the new range has lower management fees, but they pay advisers higher trail commissions.
While this seems somewhat contradictory, he says it is possible through cost savings in the way the funds are put together along with streamlining the commission structure.
Flinn says a key part of the strategy is its “core and explore” approach where there is a core portfolio of index funds at the heart of a portfolio and around that are actively managed funds which generate additional alpha – or value.
Flinn says this structure is much more cost effective than the multi-manager, multi style approach some managers use and it will deliver good returns to investors.
“Multi-manager, multi-style is just so darned expensive,” he says.
Another feature of the range – one which AMP believes is a first in New Zealand – is the introduction of what it calls the "Life Steps" in retirement savings model where clients’ portfolios become more conservative as they get older.
Essentially when an investor agrees to a plan they pre-authorise changes to the portfolio where every five years it becomes more conservative.
Flinn says Life Steps has been very popular in Australia and the United Kingdom. “People really appreciate set and forget,” he says. “They don’t like choice, they like simplicity.”
AMP plans to encourage advisers to migrate business from the SIP products to the new platform. Flinn says AMP would like to get $50 million into each of the funds (23 in total) within the next five years.
While it seems like a reasonable sum of money there is $1.3 billion sitting in SIP products.
Flinn says advisers will move their clients across because the new funds have higher trail commissions than the SIP funds.
The funds are being offered to advisers as a master trust. While they will initially be used by the AMP advisers, there are plans to push it out into the wider advisory market.
“We are very definitely wanting to attract independent financial advisers into our dealer group,” Flinn says.
He says the higher trails plus access to funds which are not widely available in New Zealand, such as Bernstein’s Strategic Value Fund, will be attractive to independent advisers.
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