Hillross Financial Services goes its separate way

As the countdown to the end of the last financial year approached, the financial planners at AMP’s wholly owned third party dealer group, Hillross Financial Services, were faced with a choice.

As a result of that choice, some of those planners will have to give up their office. Others will have to give up their clients. Some will leave Hillross altogether.

The choice is part of a calculated six-month program, which culminated on July 1, to give Hillross greater independence from AMP, although little has been said about the move outside of the funds management giant.

The choice, at its core, is a simple one: Hillross planners were asked to choose, definitively, between Hillross and AMP’s institutionally branded dealer group, AMP Financial Planning.

In many respects, the choice seemed a moot one. Financial planners attached to the independently branded Hillross, and the higher-net-worth clients it attracts, were unlikely to find an offer to move to AMP Financial Planning necessarily attractive.

Even so, Hillross managing director Jack Regan admits there has been a move, although relatively minor, by some advisers to choose AMP Financial Planning ahead of the independently branded dealer group.

“In some cases, it has meant that some people have gone back to AMP Financial Planning. It was a case of if they wanted to be with AMP Financial Planning, they were given the opportunity to do that,” Regan says.

Such a choice would no doubt have had its origins as much in Hillross’ past, as the future, which is now being set out for the dealer group.

The vast majority of financial planners who make up Hillross today were recruited through AMP’s extensive network of life insurance advisers.

These advisers, still known as ‘transitional’ advisers some 15 years after Hillross was launched, have maintained their very close links to AMP, even drawing parts of their income based on an AMP model of remuneration and putting them at odds with advisers who joined Hillross from outside of AMP.

This situation is no more. Financial planners who have elected to stay with Hillross as of the July 1 deadline have had to sever the historical umbilical cord that has kept them with one foot inside AMP.

As a result, all Hillross advisers will now be rewarded under the same remuneration model, a model based largely around the sharing of profits in the group’s PortfolioCare master trust.

By comparison, under a new remuneration model due to take effect at AMP Financial Planning from July 1, planners will be rewarded with an extra cut of commissions for generating set volumes of sales of AMP products.

The difference in the remuneration of the two sets of advisers is significant. While the remuneration of AMP Financial Planning advisers is now unambiguously linked to their ability to sell AMP products, the rewarding of Hillross advisers through PortfolioCare, a master trust built on the St George Bank owned Asgard platform, bears no relationship to their support of any particular fund manager.

This formal partitioning of Hillross from AMP Financial Planning, however, goes beyond just the remuneration of advisers.

From July 1 onwards, AMP financial planners are also no longer able to move freely between Hillross and AMP Financial Planning as they have done previously.

Instead, if they chose to switch between the two dealer groups, they will have to formally resign their position and agree to leave behind their entire client base.

Moreover, Hillross planners have been barred from even sharing office space with AMP Financial Planning advisers, although Hillross advisers have until the end of 2003 to meet this condition.

The condition will mean that up to 10 per cent of Hillross advisers who currently share their office with an AMP Financial Planning adviser may be forced to uproot their practices in an expensive move to satisfy the dealer group’s requirement.

Regan acknowledges the condition has caused much consternation, including in many rural areas where it is more common for Hillross and AMP Financial Planning advisers to operate out of the same office.

However, Regan denies the move is without justification.

“If anyone walks into a Hillross office they should not see anything that clouds their perception that it is a Hillross office,” he says.

Perhaps the more accurate statement would have been to acknowledge that Hillross’ mission is to ensure that anyone walking into a Hillross office does not mistake it for an AMP office.

In many respects, such a statement is entirely defensible.

Part of AMP Financial Planning’s new remuneration structure involves advisers being rewarded not only for their sale of AMP products, but also for assuming closer marketing and branding ties with AMP. The situation will no doubt lead to the AMP banner having a greater presence in planning offices, including those that also house Hillross advisers.

The moves to push Hillross and AMP Financial Planning further apart will no doubt prompt the question of whether it is AMP’s aim to ultimately divest Hillross altogether.

For Regan, the simple answer to the question is a definitive no.

But there is, according to Regan, more to it than that.

“This is all about clearly delineating the different propositions of AMP Financial Planning and Hillross, with AMP Financial Planning positioned as the institutional brand and Hillross the objective brand in AMP’s network,” Regan says.

“This is a statement about the ultimate relevance of Hillross within AMP.”

That relevance is destined to be drawn increasingly from outside the AMP group.

In April, Regan announced an ambitious recruitment drive in an effort to double the number of Hillross offices to over 300 Australia-wide within three years.

Significantly, Regan says the group will fuel the expansion drive by recruiting advisers from outside of the AMP network.

To this point, Regan says the group has registered interest from some 50 advisers, mostly salaried planners from Australia’s large banks who are looking at establishing their own planning offices.

If the recruitment drive is as successful as Regan would like it to be, then, for the first time, Hillross will become an organisation where the majority of its financial planners have origins outside of the AMP group. Hillross’ choice to distinguish itself from AMP will be complete.