The challenge of rebuilding the reputation of Australian financial services giant AMP, following a series of damaging revelations, has fallen to a private banking veteran, Francesco De Ferrari.
De Ferrari will become chief executive of AMP effective December 1, after 17 years at Credit Suisse, where he was most recently chief executive officer for Southeast Asia and frontier markets and head of private banking in Asia Pacific. The Swiss bank has reshuffled its regional management team to compensate.
The hire follows a disastrous period for AMP, in which it was revealed the company was charging customers for services it never intended to provide, according to the Royal Commission investigating malpractice in financial services. The firm, which has $110 billion under management, compounded its breach of trust by making a series of false statements to the regulator with regard to this activity.
Following the revelations, senior management figures, including CEO Craig Meller, were forced to quit.
A spokeperson for AMP in Sydney told AsianInvestor De Ferrari’s experience as a business turnaround expert was a key factor in the hire, while chairman David Murray said in a statement that De Ferrari was “a proven change agent".
At Credit Suisse, he was credited with building strong teams and setting a culture that balanced the interests of clients, shareholders and all other stakeholders, according to Murray.
AMP said De Ferrari was not providing interviews yet.
But Australian financial services industry insiders, speaking on condition of anonymity, were dismissive of De Ferrari’s likely ability to deal with AMP's problems. The combination of local politics, Australia’s unique business culture and the ongoing credibility problem facing the firm, were seen as major obstacles for the new chief executive.
One Australian asset management industry observer told AsianInvestor that AMP was in a difficult situation in having to find an “outsider” to enter the fray with a specific mandate to turn the business around.
He added it was “interesting that they went for a European private banker. I expect they did not have many people interested [in the job]. Why would people want to spend the next three years dealing with legal and regulatory issues?”
However, bringing in a foreign CEO would present its own problems, said the observer. He noted that Australian companies have a poor record “across the board” with offshore star CEOs. AMP, Westpac, ANZ and other Australian corporates, such as BHP and Telstra, have all experienced this “cultural clash”.
A second industry expert from the superannuation industry agreed: “They can't afford a CEO that takes a year to understand the market. They literally don't have that kind of time. Their business model is being disrupted and they are facing a Royal Commission that has yet to hand down findings.
"To say that they couldn't find someone in the local market is ridiculous,"he added. "David Murray has gone to where he feels comfortable, which is institutional banking.”
In a media statement, Murray highlighted the significant challenges facing the AMP business and the wider financial services sector in Australia. Even before this scandal came to light, industry commentators and potential investors had called for the group, which has $110 billion under management, to be split up.
De Ferrari will now have to deal with not only the legal and regulatory cases resulting from the Royal Commission, but the likely break-up of the company.
The company's real assets portfolio and its Chinese pensions business are both seen as potentially attractive for the likes of private equity firms, pension funds and insurers.
But one industry commentator told AsianInvestor that the appointment of De Ferrari “fails to understand what the company's fundamental problems are".
“They don't need to restructure their fund management operations. AMP does have some quality fund management products. The problem AMP has is its reputation with its customers. This is about rebuilding trust.
"My feeling is that they really need a leader who has some retail experience with trusted brands," he added. "The Royal Commission scrutiny means AMP must fix its structural problems quickly, if it is to remain in business in the next ten years.
In the spirit of full disclosure that AMP now operates under, the firm revealed that De Ferrari’s salary, including superannuation, will be A$2.2 million ($1.47 million) and that his maximum remuneration for 2019 (salary and incentives) will be $8.3 million.
“We have designed a remuneration structure to drive the recovery of AMP and recognise the degree of challenge in the task ahead,” said Murray in the statement.
In its recent corporate statements, AMP talks a lot about “remediation” − meaning fixing things that aren't right. In AMP’s case, that means embarking on a A$290 million remediation programme for bad financial advice.
CREDIT SUISSE SHUFFLE
Meanwhile, Credit Suisse announced on Wednesday the appointments of Francois Monnet and Benjamin Cavalli to lead its private banking operations in Asia Pacific following De Ferrari's departure. Monnet and Cavalli will continue to be based in Hong Kong and Singapore, respectively, and will report to Helman Sitohang, CEO for Asia Pacific.
Monnet will take on the role of head of private banking for North Asia, with Cavalli appointed as head of private banking for South Asia.
Cavalli joined Credit Suisse in 2009 as head of private banking for Singapore. He was appointed head of private banking for Southeast Asia and head of Singapore in October 2014. In January 2017 he also assumed the role of Singapore CEO.
Monnet joined Credit Suisse in 2007 as head of private banking for Southeast Asia. Since January 2016, he has held the role of head of private banking for Greater China. He is also the chief executive of Credit Suisse's Hong Kong branch.
On De Ferrari’s departure from Credit Suisse, Sitohang said: “Under Francesco’s leadership, we have built a highly successful private banking business model and expanded its footprint to capture the opportunities in both mature and emerging wealth markets.”