Speaking to InvestorDaily ahead of the 14th annual Wraps, Platforms & Masterfunds Conference in September, Mr Johnson described Wealthtrac as a more traditional platform provider with a “lazy” balance sheet.
“More aggressive companies would be buying companies, leveraging them up and pumping up their balance sheet with steroids. We’re quite a conservative bunch,” he said.
Wealthtrac is profitable at only $1 billion in funds under administration (FUA) because it is purely a distribution company, he said.
The same, however, cannot be said of firms like HUB24 and OneVue that have a strong focus on technology and are “losing money” as a result, said Mr Johnson.
Conversations with senior management at HUB24 have led Mr Johnson to believe the company needs to double its FUA to $2 billion “before they’ll wash their face in terms of making money”.
“My prediction is that HUB24 and OneVue will get to a state where they are [finally] making money and with good technology and then they’ll just get bought out,” he said.
Being on the cutting edge of technology is extremely “capital-intensive”, said Mr Johnson.
“All these companies are burning cash on a month-on-month basis. The advisers [who are using their services] need to think about that,” he said.
Indeed, financial planners who put all of their clients into HUB24’s or OneVue’s products are not only betting on the technology, but the sustainability of those companies, said Mr Johnson.
“So you’ve got to be careful putting your clients in there. There are two bets going on, and people don’t consider that,” he said.
Book your ticket today to hear Matthew Johnson speak about the ‘Trailblazers’ in the platform space at the 14th annual Wraps, Platforms & Masterfunds Conference in September.
