Investment platform Powerwrap plans April listing

Powerwrap CEO William Davidson, head of sales Wes Gillett, chief financial officer Bruce MacDougall and chief operating officer James Edmonds.

Investment platform company Powerwrap is moving full steam ahead with plans for an April ASX listing, as it seeks to benefit from a deluge of financial advisers abandoning the big banks amid the fallout from the Hayne royal commission.

Powerwrap chief executive Will Davidson told The Australian the firm was putting in place final preparations for an initial public offering, including making a key board appointment and conducting a non-deal roadshow in February.

He said being listed would raise brand awareness and also help Powerwrap benefit from financial advisers leaving the big banks, AMP and IOOF to set up independently or join smaller groups.

“The trend we believe to be accelerating is the continued shift away from the incumbents,” Mr Davidson said. “The royal commission is really going to accelerate the move towards boutiques.”

The proposed ASX listing timing will see Powerwrap become one of the first IPOs out of the blocks post-February profit reporting season, amid a dearth of listings in the market. Other float candidates in 2019 include Macquarie Group-backed software company Nuix and Better Pharmaceutical Australia.

Powerwrap — which focuses on advisers that look after high net worth investors — has funds under administration of $7.35 billion and its customers include PwC Australia, Escala Partners and Koda Capital.

A platform holds investments, such as managed funds and shares, in one place and is also used by financial advisers for centralised reporting. Back office and other services are also often provided by platform companies.

Mr Davidson wouldn’t comment on the potential valuation of a listed Powerwrap, instead saying the IPO price would be “guided by the market”.

The company’s last capital raising valued it at about $75m.

Powerwrap’s plans come amid strong growth at listed rival HUB24. In an ASX update yesterday, HUB24 told investors it achieved record quarterly net inflows of $1.5bn.

The numbers were helped by gaining Fitzpatricks Private Wealth as a customer, and saw HUB24’s total funds under administration swell to $10bn.

Mr Davidson said Powerwrap saw plenty of growth potential in the platform market, given the high net worth investor segment was worth $1.7 trillion and there were 435,000 investors with more than $1m in investible assets.

But Powerwrap has had a bumpy few years, including a complete changeover of its board and an overhaul of its executive leadership. Mr Davidson took the helm early last year. The company is yet to make a profit but is expected to break even at just over $9bn in FUA, depending on the mix of assets being added to the platform.

Mr Davidson is also pushing to make Powerwrap an “incubator” of financial advisers, to facilitate them going out on their own including helping with office space and other back office functions such as payroll.

In joining the local bourse, Powerwrap is also seeking to capitalise on the success of other listed platform companies.

Netwealth has proven a success for investors. After listing in 2017, its shares closed at $7.68 yesterday, more than double its IPO price of $3.70

HUB24’s stock climbed 5.9 per cent yesterday to close at $13 yesterday.

But research from Macquarie Group analysts last week cautioned of margin pressure and high valuations in the platform industry. “We initiate coverage of HUB at ‘underperform’ with a $10 target price and Netwealth at ‘neutral’ with a $7.75 target price,” they said. “Operating conditions have been supportive, with specialty platform providers benefiting from structural tailwinds delivering improved profitability.

“Our analysis supports the growth outlook but we struggle from a valuation perspective.”

HUB24 and Netwealth are largely focused on retail investors.

IPO markets have proven fickle over the past 12 months.

Mr Davidson said he believed the 2018 float data was skewed by a string listed investment companies joining the ASX, which often follow the index if it declines.

As part of the IPO preparations, Powerwrap has tapped former financial services and technology executive Donna Hardman to join its board, which is led by Anthony Wamsteker.

Ms Hardman was the founder of Quadrant 2 Consulting and also had stints at ANZ Bank, AMP and ME Bank.

Stockbrokers Bell Potter and Baillieu Holst will manage Powerwrap’s IPO. An extraordinary general meeting of investors will be held in March to seek approval for the company’s strategic plans.