In a statement to the ASX yesterday, Hub24 called a trading halt to respond to an article from the Australian Financial Review that the cash rate cut called by the RBA on Tuesday would negatively affect the cash accounts of both Hub24 and Netwealth.
Netwealth is yet to respond to the AFR report.
Platform administration fees
In particular, the article cited an analysis from Macquarie analyst Matt Johnson that, following the RBA rate cut, Hub24 would be able to negotiate a 175 basis points interest rate on the pool of cash it has from account holders, taking 125 basis points as revenue.
Mr Johnson said that a Hub Super account holder would receive a 0.5 per cent interest rate on the cash but would have to pay an administration fee of 56 basis points, leaving a “net effective return” on cash of minus 6 basis points.
In response, Hub24 said the platform administration fee relates to the platform services provided to customers and are independent of the rates of return or performance of individual assets and investment options available on the platform.
“The Hub24 cash ‘transaction’ account offers a competitive interest rate when compared to peers and when compared to similar bank products, which do not provide the same level of capability provided by the platform,” Hub24 said.
“All clients of Hub24 are receiving a positive interest rate on their cash account, post [Tuesday’s] RBA rate change. The comparison to a savings account from a major Australian bank is flawed, it refers to a five-month introductory rate of 2.20 per cent, which subsequently reverts to 0.30 per cent.”
Hub24 said its cash account is a working transaction account that facilitates the comprehensive capabilities that support a range of services to clients of the platform.
Further, it said the platform provides additional cash investment options, including term deposits, cash ETFs and cash management funds for advisers and clients seeking cash risk/return exposure, and that the cash transaction account is not the sole cash investment option available.
“In addition, the platform offers a sophisticated range of automated investment capabilities that enable advisers and clients to appropriately manage their investment portfolio to achieve their desired outcomes, whilst ensuring the amount of funds retained in this cash transaction account remains at their chosen minimum level,” Hub24 said.