If AMP succeeds in its takeover bid for AXA Asia-Pacific (AXA), it’s likely the merged entity would be heavily reliant on internal financial advice channels to continue reaping the vast majority of its retail investment flows and funds under management (FUM), according to research from Citi.  AMP currently sources 90 per cent of its $36.3 billion in funds under management (FUM) from internal operations, such as its network of tied financial planners, according to Citi’s analysis of Plan for Life’s records of FUM and flows in the 2009-10 financial year.  Importantly, the paper, Trends in Wealth Management Supplement, which followed an October paper Trends in Wealth Management: a growing role for intrafund advice, did not concern the wholesale funds managed by AMP in discrete mandates.

AMP also sourced 97 per cent of its annual inflows from internal business units. The major sources of FUM and inflows were, overwhelmingly, its institutional investment arm AMP Capital Investors and Hillross Financial Services. Of AXA’s $13.8 billion in FUM, 67 per cent was sourced internally from business units AXA Australia, AllianceBernstein and ipac Securities. Compared to other top 10 listed wealth managers, AXA kept its sourcing of inflows “mostly in the family”, drawing funds from these three sources, the paper stated.Challenger and Perpetual were the groups that sourced the most FUM from external sources. Perpetual depended most on Macquarie and the four major banks for inflows and FUM, while Challenger ‘s top 5 sources were NSW State Super, BT/Westpac, Macquarie, ANZ and Commonwealth Bank/Colonial First State.

Commenting on AXA, Citi said the only entity for which AXA was a top 5 provider of FUM was itself. “However, for flows it doesn’t even make its own top five, which in part reflects its net outflow position,” they said.  Their analysis showed BT/Westpac as a top five supplier of FUM to the 10 major listed wealth managers: the big four banks, AMP, AXA, Perpetual, Challenger, IOOF Holdings and Macquarie Bank. BT/Westpac had provided the most FUM to other major wealth managers, but Macquarie had surpassed it in net flows. AMP was a top 5 provider of FUM for ANZ, but not for annual net inflows. On the other hand, AMP was a top 5 provider of net inflows for BT/Westpac, but not when it came to FUM. The study concluded that AMP was the prime stock pick out of the domestic wealth managers because it offered the best long-term value. But this recommendation was made before it relaunched its bid for AXA. It showed the Citi authors were long in AXA stock, and also long in the securities of ANZ Bank, Commonwealth Bank, Macquarie Group, National Australia Bank and Westpac.

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