* AMP allows A$290 mln for bad financial advice
* Company spending another A$150 mln investigating practices
* Shares at their lowest since 2003 (Adds analyst comment, updates shares)
SYDNEY, July 27 (Reuters) - Australia's biggest wealth manager, AMP Ltd, on Friday flagged A$530 million ($391.4 million) of costs stemming from an inquiry into financial sector misconduct and warned first-half profit would decline, sending its shares to a 15-year low.
The trading update two weeks before it reports first-half earnings puts an early dollar figure on the impact of the Royal Commission inquiry, which exposed systemic wrongdoing at AMP and across the financial system of the world's 14th-largest economy.
The revelations of board-level deception of a regulator over the deliberate charging of customers for financial advice it never gave have cost AMP its chairman, CEO and several directors.
The 170-year-old stalwart of Australian financial planning said it was putting aside A$290 million to compensate customers for poor advice dating back a decade, another A$150 million to investigate its adviser network, A$70 million to improve risk management and compliance and another A$55 million in royal commission related costs.
On top of that, it said it was cutting fees for 700,000 pension customers, at a cost of A$50 million a year.
As the year-long Royal Commission turns its sights on the superannuation industry next month, other superannuation companies also have said they are cutting fees in apparent efforts to get ahead of any bad publicity.
"Clearly it's been an unsettling first half for the company," said AMP's interim CEO, Mike Wilkins.
AMP shares fell nearly 5 percent by mid afternoon, hitting their lowest since 2003, while the broader market was up 0.7 percent. AMP shares are down 36 percent since the inquiry started in February, wiping A$5.5 billion from its market value.
Analysts said the update was a "starting point" but warned that AMP still faced the headwinds from the Royal Commission, including the loss of customers, brand damage and heightened regulation.
"We are yet to see other key metrics," said Goldman Sachs analyst Ingrid Groer in a client note, referring to future outflows of funds under management, costs of shareholder class actions and industry-wide changes to the financial planning industry.
"We expect many investors will remain on the sidelines until some of these other factors are clearer."
Omkar Joshi, a portfolio manager at Regal Funds Management, said questions remained unanswered given the Royal Commission was still underway. It reports back in February.
"What they've announced today is good but does that mean it's all fixed from here?" said Joshi, whose company does not own AMP shares.
"There is a new CEO yet to be announced and there is still a Royal Commission underway, so it's not that clear cut."
Shaw and Partners banking analyst Brett Le Mesurier said AMP may end up paying more to financial advice customers given it only just started investigating the unit's past practices.
"There is scope for this provision to be insufficient," he said.
AMP said underlying net profit would fall to between A$490 million and A$500 million for the six months to end-June, from A$553 million a year prior, due to losses incurred by its income insurance division.
It added that it expected to pay dividends at the bottom of its target range, 70 percent to 90 percent of net profit, for the full year.
($1 = 1.3541 Australian dollars) (Reporting by Byron Kaye and Paulina Duran; Editing by Tom Brown and Stephen Coates)