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Matt Heine and his father Michael Heine co-founders of Netwealth at their bell ringing at the ASX.
The joint managing director of ASX-listed investment platform Netweath says there is a “once in a lifetime shift” occurring in the wealth management industry, with a three-year window open for disruptive companies to take advantage of.
Matt Heine, who along with his father Michael Heine heads up the 19-year old, Melbourne-based company, said the migration of financial planners away from the big banks, towards self-licensing and smaller dealer groups had contributed to its growth.
“There is still an incredible amount of change still to come through both in regulation and in the market dynamics. To expect that to wash through in the next 12 months is unrealistic,” he told The Australian Financial Review after the release of its June quarter business update.
“It’s going to take two-three years depending on what regulation comes out of the royal commission… there is going to be a lot of change both in the business models and distribution structures and that is going to take some time to wash through the system”.
Netwealth made a splash in November last year with a $1 billion ASX-debut, and is part of a cohort of tech-savvy listed investment and administration platforms, used primarily by financial advisers, that are stealing market share from the big bank platforms such as CBA’s CFS, AMP’s MyNorth or Westpac’s Panorama.
Since listing the company’s share price has climbed almost 67 per cent, hitting a high of $9.53 on June 5. On Friday the stock jumped 4.85 percent to $8.86 at 1230pm AEST.
The Heine family own almost 64 per cent of the company and feature in Boss Magazine‘s Rich Bosses List.
In an announcement to the ASX on Friday, Netwealth reported a 16 per cent- or $1.4 billion- uptick in quarterly flows, which helped pushed its funds under administration (FUA) up 41 per cent ($5.2 billion) for the year to hit a $17.96 billion.
The $2 billion company also lifted its profit guidance to 6 per cent above its full year 2018 prospectus forecast.
Funds under management, including for Netwealth’s managed account investment product, was $2.8 billion, an 11 per cent increase for the June quarter. For the 2018 full year the managed account portion of the business grew by 170 per cent to $1.8 billion.
Research from Investment Trends reveals that being able to access managed accounts – a product which lets advisers set an investment objective with clients up-front allowing the portfolio to be rebalanced without additional advice- is one of the top three reasons they favour a platform.
Mr Heine said churn between platforms would continue thanks to advanced technology offerings from the specialty players and advisers shifting from the banks, adding that the company was eyeing the high net wealth investor market, which has been helping bump up its growing FUA.
“As we move more into the Netflix era, it’s really important that that online experience is just fundamentally better,” he said.
“Over the last 12 months, if not longer we have spent time building out our high net wealth offerings. While its by no means the only part of the market we’re working with, its an increasing opportunity for us give the breadth of our product offering”.
On Thursday fellow ASX-listed platform Praemium’s shares surged more than 14 per cent after it reported a 34 per cent uptick in quarterly flows, pushing its FUA up 35 per cent for the year to $8.3 billion.
According to a Credit Suisse review of the Australian platform market over the past five years, specialist platforms (including Netwealth, Hub24, OneVue, Praemium and managedaccounts.com.au) have increased their market share from 0.9 per cent of FUA in March 2013 to 4 per cent in March 2018.
“Over the same period, the institutional platforms – those owned by the major banks, AMP, Macquarie and IOOF – lost market share, which fell from 88.2 per cent to 84.7 per cent,” said Credit Suisse.
The trend is prompted by the exodus of financial advisers from big banks to non-bank advice groups, with these planners preferring to direct client money to so-called speciality platform providers.