Platform arms race intensifies

In its 2023 Wealth Tech Predictions report, Finura said the platform technology space is “emerging as a three-horse race for growth”, with HUB24, Netwealth and Macquarie at the front of the pack.

“We saw significant interest from major technology players in building their data aggregation capabilities. HUB24 acquiring Class, the launch of HubConnect Licensee, and Netwealth taking a full ownership option against XEPPO. This sets the chess board for a fascinating battle to build data as a service for the sector,” the report said.

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“The wealth data ecosystem still hinges on IRESS. With a strategy to provide more industry ‘connectivity’, we watch them with interest in 2023–24.”

Finura predicted that consolidation will continue, and the top of the platform market will continue to swallow up the smaller players.

“We will still believe Praemium is likely to be involved in an M&A transaction at some stage in 2023, despite the lukewarm response to Netwealth’s offer last year,” the report said.

“The tide has been against the more established ex-bank players for some time. Evaporating distribution, aging technology, and lack of focus contributed to their net flow problems.

“We will see more contemporary offers this year from CFS and Macquarie, who are overhauling their technology approach. Integrations and technology flexibility will be the focus.”

According to the most recent Wealth Data numbers, there are 15,867 financial advisers in Australia, as of 26 January. Finura predicted that this could become a problem for smaller platforms.

“The real question on everyone’s lips is how many platforms this market can sustain with 15,000 advisers for the foreseeable future. According to Cerulli, the US has ~14,000 RIAs with $102 trillion in regulatory FUM. These advisers direct 85 per cent of all their assets to the top three custodians,” the report said.

“Can Australia sustain eight major platforms? How will the ex-bank-owned platforms compete with specialty platform providers? We expect further consolidation. It is a scale and technology battleground and net positive flows are becoming rare.”