AMP turns distribution strategy on its head

Why would one of Australia's most successful financial planning distribution businesses spend millions on setting up a direct distribution business? Stuart Engel speaks with AMP about the biggest change to its financial services business in the past 20 years.

AMP is not the first financial services group to roll out a direct distribution channel. In fact, it is one of the few that haven't over the past five years.

Like many of its competitors, AMP has not wanted to cross the loyal financial planners that have made them what they are today. Not only its army of nearly 2000 financial planners, but also other advisers who recommend AMP products. After all, why bite the hand that feeds?

But while it is not the first, the direct distribution initiative it launched just before the Olympics is probably the most far-reaching direct distribution effort and, what's more, it has the blessing of the financial planning community. Even better, the punters seem to be responding. In less than two months, 11,000 people have already registered to use the service and its customer base has been growing at about 1,000 a week. And AMP hasn't even started the advertising campaign to promote the site.

Strategically, AMP Direct has benefited from the hindsight gathered by observing what has and hasn't worked in direct distribution both here and overseas. For example, its 50 per cent owned Virgin Direct business has made massive inroads into the UK market, where it competes head to head with the likes of Prudential's Egg direct distribution business. But while both of these brands are grabbing market share, the profitability of the businesses remains shaky.

Both AMP and Prudential chose new brands to launch their direct distribution channels in the UK which meant spending a great deal of brand awareness promotional campaigns.

A new brand was one of the options being considered when the direct distribution plan was on the drawing board. Conventional wisdom at the time pointed towards a multiple brand strategy which AMP had already attempted with the Priority One brand for its direct banking business. MLC had also adopted a similar strategy for its Your Prosperity direct distribution business.

However, AMP decided to punt on the financial services market having grown up sufficiently to understand the complementary nature of a direct strategy and an intermediated strategy.

AMP Direct general manager Anne De Salis says the decision to run with the AMP name reflects the value of the brand among consumers, particularly as it was launched at the height of AMP's extensive involvement with the Olympics.

"It also reflects the maturity of our financial planners who recognise the complementary nature of the retail (adviser) and direct businesses," she says.

"The advisers understand that the system has been set up so that customers move between the direct business and the retail business at different times of their lives."

AMP's Financial Services division took great care to not alienate its advisers when it was developing the strategy. De Salis says advisers were informed of the direct strategy throughout the development process. Specific protocols were also developed with AMP's Adviser Association to ensure the strategy helped rather than hindered the development of each adviser's business. Dealing with sales leads from the direct service was one of the protocols established by the working group. Since the launch, sales leads for advisers have increased 300 per cent, according to De Salis.

Many of those sales leads have come through the AMP@Work service which links the direct channel with AMP's huge corporate superannuation customer base. AMP@Work provides account balance information plus a host of member education initiatives and a reward program for employees.

De Salis says services such as AMP@Work position AMP as the first port of call for consumers when they are seeking financial services. It is a similar philosophy which underlies the Account Minder account aggregation (or screen scraping) service and the portfolio management tool Managing My Portfolio @ AMP which are integral parts of the AMP Direct offering.

"AMP Financial Services wants to position itself as the relationship manager," De Salis says.

In line with the strategy, the group is in the process of finalising a customer relationship management (CRM) program. An announcement on the nature of the new program is expected early in the new year.

"Our financial planners know their clients very well, but AMP as an organisation does not have the same depth of understanding," De Salis.

Through its efforts to understand clients, AMP hopes to capture more cross-selling opportunities. For example, the group hopes to increase its share of the retiree market.

"We have a strong relationship with a large number of people in the accumulation phase through our corporate superannuation business," De Salis says.

But often these customers will desert AMP when it comes to retirement. They are often unaware that AMP managed their superannuation while at work so they don't think of AMP when it comes to retirement. Often, these customers will take their super as a lump sum and deposit it in their bank account. The bank will then use CRM programs to identify the client and target them for marketing retirement products and advice.

"By engaging the clients throughout the accumulation phase and adding value to the relationship with other services, we hope to reverse the trend," De Salis says.

On top of the portfolio services being offered through AMP Direct, the initiative also has the hallmarks of the direct financial services platforms that have preceded it. It offers managed funds direct without an entry fee, Internet banking, Internet broking, online calculators and access to its general insurance products.

But the products and services AMP Direct offers also go beyond the well-trodden path of other direct distributors. Probably most spectacularly, it has become one of the first financial services majors to embrace what is quickly becoming known as the poor man's wrap account - the Account Minder account aggregation service.

AMP Direct is also at the forefront of direct distribution of life insurance products. It is offering a simple term life product, AMP Firstcare, which will soon be one of the first products using an online underwriting process.

AMP Direct is also one of the first direct distribution platforms to offer lifestyle products from third party vendors such as travel (Ansett), computers (IBM) and special offers on lifestyle books. De Salis says AMP is also in discussions with a number of other lifestyle product providers to expand this part of AMP Direct.

By establishing closer relationships with product providers and more importantly with its five million strong customer database, AMP hopes to build a fence around its customers much like an Internet portal. The strategy is probably best summed up by the AMP vision statement used for the revamp of its financial services business which positions AMP as "the customer's window to the financial world".