Australia | 2:12 PM
This month's June quarter market updates revealed Hub24's ((HUB)) custodial balance of $112.7bn has edged ahead of Netwealth's ((NWL)) $111.9bn for the first time with strong momentum continuing in favour of the former.
UBS expects Hub24's stronger net inflow momentum will drive further market share gains over the medium term, reinforcing this broker's ongoing relative preference for Hub24 over Netwealth.
Morgan Stanley also suggests Hub24's strong net revenue retention (NRR) metric (which is highly correlated with a premium multiple for software stocks) will provide a foundation for years of durable growth.
Beyond expanding the adviser base, management drives growth through three key levers: advisers onboarding more clients, rising customer balances, and greater adoption of additional features and services, explains the broker.
Although heightened market volatility during the quarter led to an increase in gross outflows for both companies, the negative impact was more pronounced for Netwealth, largely due to elevated redemptions from larger accounts. Hub24 benefited from a smaller number of large accounts in combination with a higher skew to superannuation.
Moelis attributes Hub24's premium valuation to three key factors: the compounding earnings impact from consistent market share gains in a structurally growing and evolving industry; strong innovation, with new product development effectively leveraging an established adviser base; and earnings leverage to positive market returns, benefiting both platform funds under administration (FUA) and net flows.
Unlike Netwealth, Hub24's June quarter surprised analysts at Citi, with a larger-than-expected migration from Equity Trustees the key driver for the 'beat'. But even without taking this into account, underlying flows were still 4% ahead of the broker's forecast as net flows continue to grow at 30%.
Underpinning UBS' confidence in the sustainability of adviser engagement and net flow traction, Hub24 enters FY26 with strong adviser growth momentum (up 13% in the fourth quarter) and leading adviser satisfaction, having been ranked No 1 in Net Promoter Score in the 2025 Adviser Technology Needs Report.
Moelis also notes Hub24 recorded the largest quarterly and annual market share gains among all platform providers, with the latest Plan for Life data in March showing its share had improved to 8.7%, up from 7.2% in March 2024.
This broker highlights adviser growth remains strong at 12.6% year-on-year, which is a key leading indicator of future net flows.
Rising Markets Provide Tailwinds
Market movements for the June quarter provided a tailwind for both Hub24 and Netwealth.
According to management at Hub24, "operating in structurally growing markets driven by demographic trends and compulsory superannuation, the company is well positioned for continued growth, supported by a strong pipeline of opportunities from new and existing relationships."
Funds under administration (FUA) for Hub24 were in line with Citi's forecast as the stronger flows were offset by lower-than-expected market movement. Custodial FUA of $112.7bn came in 2% ahead of the consensus estimate.
For Netwealth, a miss in net flows versus Citi's forecast was driven by weaker inflows, possibly reflecting market volatility throughout the quarter. Custody FUA met the broker's forecast, while total FUA was stronger than the consensus estimate.
Management at Netwealth also "remains confident in our net flows outlook for FY26 and beyond, across a broad range of client groups and customer tiers".
No Positive Surprise From Netwealth
Netwealth Group offers a wealth management platform tailored to financial intermediaries and their clients, supporting both superannuation through Netwealth Super Accelerator and non-super investments via Netwealth Wealth Accelerator, enabling streamlined portfolio administration in a single interface.
In the fourth quarter, Netwealth reported custodial net inflows of $3.7bn, falling approximately -8% short of consensus expectations. Macquarie attributes this miss to slightly elevated outflows amid increased market volatility.
The minor disappointment doesn't stop Bell Potter from expressing confidence in Netwealth's structural growth trajectory, noting adjusted inflows of $7.6bn reflect a 7% acceleration in the monthly run-rate, while net account additions rose 4.2%; a record high. For the full year, Netwealth achieved record inflows of $29.2bn, lifting custodial FUA by $24.8bn.
Bell Potter urges caution, however, citing weaker Rule of 40 metrics over the forecast period and questioning the company's valuation multiple relative to high consensus net flow expectations. Still, account growth and inflow performance remain strong and aligned with management's guidance.
Jarden expects the solid pace of account growth, up 4% quarter-on-quarter to 162,200 and the strongest since 3QFY21, to support sustainable earnings momentum into FY26.
On the funds under management (FUM) side, net flows were $1.1bn for the quarter, up 16% year-on-year, bringing total FUM to $27bn. Management noted 96% of FUM flows were into managed accounts, with the managed account FUM-to-total FUA ratio rising to 20.8%, up from 20.6% in the prior quarter and 20.0% a year ago.
Wilsons believes higher pooled cash balances and increased trading activity likely helped offset margin pressure from temporarily lower administration fee revenues in the half.
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