Wealth managers' recovery looks promising: Research

AMP, Insignia Financial and Challenger are poised to benefit from improved flows, lighter regulation and emerging longevity solutions despite the market volatility, analysis from Morgan Stanley shows.

AMP's flow momentum is set to continue, combined with potential for further cost-outs in the superannuation and investment division, a new analyst note states, adding the firm has differentiated its North platform by offering MyNorth Lifetime products, blending accumulation/super with a retirement income solution.

As a more focused wealth and bank operator, AMP is now starting to deliver, the research said, thanks to platforms seeing some inflows, super outflows improving, margin pressure easing and the development of retirement income capabilities.

Morgan Stanley said AMP comes the closest to executing on the "retirement ecosystem mindset" but forecasts that lower bank volumes and more expensive deposit funding mix will drive a -6% FY25 earnings cut.

For Insignia, analysts believe there is longer-term potential for a turnaround as the firm seeks to establish a profitable footprint in the wealth landscape vacated by the banks.

"Equally, we think returning Insignia to net inflows will be a multi-year story, as will be the cost optimisation," analysts said.

"Integration of the MLC and ex-ANZ Advice business and resolving legacy issues is proving to be more complex and expensive than initially expected, leading to large below-the-line cash outflows in the near term."

As competition in the platform's superannuation and wrap space heats up, Morgan Stanley notes that Insignia's market share is falling.

"Wealth market is undergoing significant change with declining adviser numbers and incumbent platforms losing market share to specialist platforms," it said.

Challenger, meanwhile, stands out for its life insurance-led business model and longevity growth options. But the wealth manager "needs to lift returns."

Morgan Stanley said Challenger has yet to deliver on its full potential of building solutions for its clients to drive sales.

For example, its March quarter annuity net book growth was 1% lower than Morgan Stanley's estimates and the total life book growth was negative, though longer duration sales were stronger. APRA's upcoming capital review could also help Challenger, analysts said, as will its desire to expand into private credit.

"Retirement income opportunity may broaden if structure of super is reviewed, but we think CGF needs to have broader product offerings to capture this," the note said.

"Funds management business has relatively solid flows vs. asset manager peers and presents a diversification option for CGF, but needs to become a larger part of the group earnings mix."