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AI is fuelling market share gains of ASX-listed advice platforms

By Maja Garaca Djurdjevic
4 minute read

The rapid adoption of artificial intelligence (AI) by ASX-listed tech giants like HUB24 and Netwealth is reshaping the financial advisory landscape, driving operational efficiencies and market share gains, according to a professional.

Damon Callaghan, a partner at ECP Asset Management, foresees a continued surge in these companies’ dominance, fuelled by AI-driven innovations and strategic positioning.

In a statement on Friday, Callaghan highlighted that the current AI revolution isn’t just about efficiency gains – it’s about market disruption. Both HUB24 and Netwealth have, in his opinion, strategically positioned themselves to capitalise on industry shifts post the Hayne royal commission, attracting a wave of advisers and client funds seeking cutting-edge solutions.

“We believe the innovation both are introducing to advisers will continue to widen the competitive advantages of both companies when compared to their competitors, giving advisers yet another reason to consolidate clients onto the HUB24 and Netwealth platforms,” said Callaghan.

“Both platforms’ success emerged from having developed innovations focused on advisor and clients’ needs - successfully challenging vertically integrated wealth models that had historically dominated the adviser market. The growth of both platforms was accelerated by the Hayne royal commission, which resulted in an exodus of advisers from banks towards the IFA industry. This opportunity retains significant runway for both companies.”

According to Callaghan, the numbers speak volumes. Namely, despite holding a 7 per cent share of platform funds under administration (FUA), HUB24 and Netwealth are capturing a disproportionate share of industry flows.

“To add context here, HUB24 and Netwealth have $17 million to $22 million FUA per adviser, which is one-third of the current industry average of around $60 million, indicating the upside ahead from advisers’ continual back-book consolidation.”

As such, Callaghan believes investors should take note of these developments.

“While both companies have had a strong start in 2024, investors should look through any share price volatility and remain focused on the big picture growth and competitive advantage opportunity underpinning each company,” said Callaghan.

Back in March, InvestorDaily reported the ECP Growth Companies Fund, which holds selected Australian growth companies across the spectrum of growth, comprises both HUB24 (5.22 per cent) and Netwealth (3.47 per cent).

“We first invested in [the stocks] in 2017,” Callaghan told InvestorDaily at the time.

Today, the growing popularity of financial advice, and platforms by extension, comes against the backdrop of a massive intergenerational wealth transfer expected in Australia over the next two decades. In 2021, a Productivity Commission report estimated that around $3.5 trillion in assets will be transferred between generations by 2050.

Amid this perfect storm, HUB24 and Netwealth have emerged as two popular financial services stocks as fund managers wade into wealth management’s platforms race.

In the latest reporting season, HUB24 reported a funds under administration record of $100 billion at the end of March, marking growth of 30 per cent from the previous corresponding period.

Its platform FUA stood at $79.7 billion as at 31 March, up 34 per cent on the year, while portfolio, administration and reporting services FUA added 16 per cent to $20.3 billion.

Meanwhile, in its latest results, Netwealth reported a quarterly funds under administration spike of $6.7 billion to $84.7 billion as of 31 March, comprising net inflows of $2.7 billion and positive market movement of $4 billion.

Jamie Hannah, deputy head of investments and capital markets, VanEck Australia, said he was “not surprised” by HUB24’s promising results in the last reporting season.

“HUB24 continued to post solid results as their share price has continued to outperform the ASX 200,” Hannah observed.

“I’m not surprised by HUB24’s continued success, as we work with various platforms daily and HUB24 have always excelled in their execution platform and engagement. It’s evident that the success of their execution area flows through into other areas for them to continue their growth trajectory.”