Regulatory changes in the financial planning space and the rise of independent financial advisers have been major contributors to Netwealth’s success in the highly competitive platforms market.
That’s according to Morningstar analyst Gareth James, who this week noted that Netwealth has also benefited from the banning of fees paid by investment administration platforms and investment managers to financial advisers recommending their products.
“This has encouraged financial advisers to seek new fee sources, including managed accounts, which were mainly available on independent platforms,” Mr James said.
“Netwealth has exploited the bureaucracy and lethargy of the relatively small number of large and dominant Australian financial services firms to develop a superior investment administration platform that has quickly increased funds under administration, or FUA.
“The company has also benefited from regulatory change such as the Future of Financial Advice, or FOFA, reforms, which require financial advisers to act in their clients’ best interests.
“These reforms have encouraged financial advisers to break away from vertically integrated, and potentially conflicted, wealth management businesses to operate as independent financial advisers, or IFAs, and use independent investment administration platforms such as Netwealth in the process.”
Netwealth released its results for fiscal 2018 this week, which showed FUA growth of 41 per cent to $17.96 billion, beating its prospectus forecast by 17.8 per cent, or $2.7 billion.
There are currently 2,271 financial intermediaries using Netwealth, which was rated the number one overall platform for functionality and adviser satisfaction by Investment Trends.
Pricing competition has become a concern for platform providers, illustrated by BT’s decision to cap pricing on its Panorama platform at $2,000.
In its trading update this week, Netwealth said it expects pricing competition to continue, but remains confident that the strength and versatility of its offering can outpace rivals.
“Netwealth’s superior service and platform functionality, combined with our competitive pricing, places us in a very strong position to compete and succeed,” the group said.
“We expect the ongoing benefits of scale, continued improvements to operational processes and automated technology, will offset any pricing compression and re-investment costs.”
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