Wilson Asset Management's Geoff Wilson says he's wary of AMP shares even after they've fallen 30 per cent.
Wilson Asset Management’s Geoff Wilson says he’s wary of AMP shares even after they’ve fallen 30 per cent.
by Sarah Turner

Highly-regarded fund manager Geoff Wilson has warned against investing in beaten down AMP shares, saying the embattled wealth manager’s financial planning business was “rotten” to the core.

Mr Wilson’s damning assessment of AMP, whose shares have tumbled 30 per cent since March, came after speaking to former employees of the financial planning business, which has been the subject of a damning evidence from the royal commission that led to the departure of its chief executive and chairman.

Investors are struggling to value shares in the $11 billion company given the damage done to the brand and the likely hit to future earnings from the loss of trust in the scandal-plagued financial planning business.

Mr Wilson, a value-focused investor, said he was prepared to buy unpopular stocks trading cheaply but he was wary of allocating capital to AMP shares.

“The problem with AMP is that I just don’t know at what price AMP is a buy”, he told the Future Generation Investment Forum in Sydney on Tuesday. “There might not be a price.”

“I was sitting down with some financial planners and they were taking me through – one of them used to work at an AMP financial planning office – and he just said ‘hey look, this is just the tip. He said it is rotten all the way through.'”

AMP shares advanced for a second day on Tuesday, rising 0.5 per cent.

Crackdown expected

More than $663 million was wiped off the company’s market value last Friday, when the stock plumbed its lowest level since 2012, amid fears a potential overhaul of financial planning laws could cripple its core advice business and damage to its reputation could prompt customers to flee. The royal commission revealed AMP had mislead the Australian Securities and Investment Commissions about the charging of client fees despite no services being delivered.

It is expected there will be a significant regulatory crackdown on financial services companies following the royal commission’s revelations of bad practices. The lack of regulatory clarity prompted some fund managers to warn that any response from the government and the corporate watchdog needed to be carefully considered.

“We’re all still absorbing the magnitude of the information that’s coming out, ” said Graham Hay, deputy portfolio manager at Antipodes Partners, told the forum.

“There will be a pretty big response,” he said “I think the one thing we do have to avoid is the law of unintended consequence. And that is you end up regulating in such a way that you put power back in the hands of the large institutions.

 “I think it’s in everyone’s interest that the markets remain very competitive and that consumers have a lot of transparency so we have to avoid a regulatory regime where inadvertently we take that away.”
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