AMP chief defends integrated financial business model

While there are “undoubtedly inherent conflicts of interest” in integrated financial services businesses, AMP chief executive Craig Dunn has defended the model.

Dunn’s definition of an 'integrated business' is one that offers a range of financial products and services, including both investment products and advice — as is AMP’s.

Speaking at a Trans Tasman Business Circle event today, Dunn acknowledged that some people in the financial services industry oppose integrated financial services models, and believe that financial planners must be “totally separate from companies that make financial products”.

But Dunn said he “would be wary about reading too much into the term 'independent'”, given that many of those involved in the major financial scandals of the past 18 months had “not had to live with the consequences of the failures of the advice or products they recommended”.

He said this was not the case under AMP's model, and that the group stands behind the advice its planners give.

Dunn argued “planners aligned to large institutions have largely avoided the financial failures of the past 18 months”.

“Yet some critics are using these scandals, and the human distress they have caused, as a reason to call for integrated businesses to be dismantled.”

He said the role of integrated financial services businesses is being debated by some “as though this business model alone is the primary cause of many of the issues our industry is dealing with today”.

Dunn said “no business model is perfect”, and acknowledged that there are conflicts of interest in integrated businesses that need to be carefully managed. But he also argued that these businesses provide benefits to consumers that should not be overlooked.

Dunn said while there have long been those who predict the “end of financial planners”, he believes this has not, and will not occur, as financial planners meet a core human need: the majority of people want to build a relationship when discussing their financial affairs.

However, Dunn said while people do want to trust their financial planner, “consumers are also realistic and they know that people are fallible”.

“Sometimes they make mistakes. Sometimes things go wrong,” Dunn said.

Therefore, he argued, consumers “want their relationship with a financial planner to be backed by a big brand”. Consumers want the security of knowing there are “checks and balances” in place to manage risks and that the institution has the “financial strength and the will to put things right if they go wrong”.