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AMP is over-refunding its customers. What does this mean for the AMP share price?

The AMP Limited (ASX: AMP) share price is one to watch this morning after an article on its customer refund policy by the Australian Financial Review (AFR).

What did the AFR article report?

According to the AFR article, AMP is ramping up its customer remediation and refunding hundreds of thousands of customers.

That includes a significant number of “low value” customers, including those that don’t have any problems with their service.

The AFR cited a $1,300 cheque to a satisfied client as AMP looks to speed up the remediation process. The wealth manager said it was on track to complete its $778 million remediation program by 2021.

What does this mean for the AMP share price?

The news of potentially over-refunding customers can be viewed in a couple of ways.

On the one hand, it shows that AMP is looking at an overhaul of its customer compensation methods. Rather than scrounging for every dollar, it looks like the wealth manager is happy to pay as part of its “if it’s grey, we pay” policy.

The obvious downside for shareholders is more money heading out the door. That’s frustrating at the best of times, let alone when the AMP share price is down 62.60% since the start of January 2018.

However, the long-term implications of AMP’s new policy could be beneficial. Higher payments could mean greater customer retention and more revenue for the group.

On top of this, a strong brand image and good reputation are invaluable in the financial services industry.

Either way, the AMP share price will be one to watch as we head towards the Christmas break.

Is AMP the best ASX wealth manager right now?

While the group’s shares are down 19.67% in 2019, it’s hard to argue it’s the best ASX wealth manager right now.

Magellan Financial Group Ltd (ASX: MFG) shares are flying higher and have surged 144.42% higher this year. The group has outperformed the AMP share price significantly in recent years on the back of strong investment performances and fund inflows.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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