The competition between HUB24 and Netwealth has never been more intense, with both platforms posting a similar market share and jointly dominating inflows.
Both providers reported 1H24 results to the ASX on Tuesday morning, with HUB24 revealing a 39 per cent increase in statutory net profit after tax (NPAT) of $21.5 million in 1H24, while Netwealth NPAT grew 27.2 per cent to 39.3 million.
At close of business Tuesday afternoon, Netwealth’s share price increased 5.62 per cent to $18.60, while HUB24 increased 4.88 per cent to $39.36.
Netwealth funds under administration (FUA) stood at $78 billion at the end of 2023, growing 24.9 per cent over the year, and as of 16 February had reached $80.8 billion.
HUB24 total FUA grew to $91.2 billion, with platform FUA increasing to 72.4 billion by the end of 1H24 and to $74.8 billion as of 15 February.
Data from Plan for Life dated 30 September 2023 and included in Netwealth’s investor presentation, showed both Netwealth (7.4 per cent) and HUB24 (6.7 per cent) having grown their market share, while the legacy platforms lost ground.
However, the largest platform in terms of FUA, Insignia Financial, held $199 billion which represented 20.4 per cent of the market and was still roughly three times the size of HUB24 or Netwealth.
Netwealth managing director Matt Heine was unavailable for comment, but HUB24 chief executive Andrew Alcock told Professional Planner the competition was “great”.
“It drives us to keep innovating and disrupting,” Alcock said.
Peter Worn, joint managing director of independent advice tech consultancy Finura Group, said the continued growth in market share and net inflows of both companies is “really impressive”.
“[And] also corresponding to the underlying profitability of both groups,” Worn said.
“Not only are they continuing to grow their market position, but they’re also being able to monetise that well.”
Worn said it has been predicted that both firms will be hit with price and margin pressure, but that is yet to happen.
“Obviously some investors may be asking well how long this can keep continuing, they’re both trading on quite high P/E multiples [price to earnings] so there will be continued pressure on these businesses to keep growing at their current rates,” Worn said.
Steady flows
The increase in FUA and inflows has come at the expense of legacy platforms, with HUB24 stating of the $7.2 billion of net inflows made in 1H24, $1.8 billion was from the transition of Insignia Financial’s Rhythm Super.
“We’ve got a great runway of growth, we’re looking at potentially up to $16 billion in net flows this year,” Alcock said.
“We’ve got $3 billion from Equity Trustees coming in on top of strong organic flows.”
According to the Plan for Life data, Netwealth collected $8.9 billion in net inflows, while HUB24 added $8.6 billion.
“If you look at the net inflows across the industry, [HUB and Netwealth are] almost getting 70 per cent of net inflows – them and Macquarie, effectively,” Worn said.
However, Worn noted that while both businesses get lumped together for their similarities, they do have diverging strategies which will pull them further apart in the long term.
“HUB have a more diversified mix of revenue since they bought Class and assets like Myprosperity,” Worn said.
“In time we will see some different factors impacting how these businesses perform when Netwealth get the majority of revenue from traditional platform business.”
Alcock said the firm is focused beyond platforms and on transforming the industry.
“We’re absolutely focused on our core platform business, but we are focused on data and technology and how it helps with that,” Alcock said.
“We continue to disrupt, continue to lead. We have a role to play because of accessibility of advice and the challenges advisers and licensees have to deliver advice efficiently and with compliance. We’re absolutely committed to that and working with business partners to do that.”
Race to the top
HUB24 retained top spot in Investment Trends’ Platform Benchmarking rankings, released last week, with Netwealth narrowly behind in second place.
HUB24 held the top spot for the second year in a row, after overtaking Netwealth in the previous year.
“What is incredible to me is that probably two or three years ago there was quite a big gap in market capitalisation between HUB and Netwealth whereas now it’s about half a billion dollars,” Worn said.
“HUB have really caught up to Netwealth from a market cap perspective which is reflected in the market share side of the flows, they’re pretty much neck and neck now.”
As noted in HUB24’s Q2 update in January, the number advisers using its platform during 1H24 increased to 4297, up 16 per cent from the previous corresponding period.
