Wealth platform consolidation within two years: Netwealth

Netwealth’s CEO says private equity could kick off a wave of consolidation in the industry.

Pictured are Matt Heine, CEO of Netwealth, (left) and his father, Michael Heine, a director of the company. Stuart McEvoy/The Australian.

Private equity circling the wealth platform market could kick off a wave of consolidation in the industry over the next 12 to 24 months, according to Netwealth chief executive Matt Heine.

Speaking at a Citi investment conference on Tuesday, Mr Heine said there were too many platforms in the local market, with a lot of money sitting in older, legacy platforms.

“There’s going to be consolidation. There’s no doubt there are probably too many platforms in the Australian market, and we will see consolidation. I think we will start to really see that take place over the next 12 to 24 months,” Mr Heine said.

“There’s a lot going on in the marketplace. You’ve got private equity circling the industry, they’re keen to do something. You’ve (also) got private equity that’s made investments that’s getting towards the end of their investment time frame. And you’ve got a lot of money that’s still sitting on legacy platforms that might be better off combined with other platforms. (So) I think there will be consolidation, and it’s going to be fascinating to watch,” he told the conference.

Speaking on the same panel, HUB24 CEO Andrew Alcock added banks to the list of parties interested in the sector, as he pointed to the attractive returns platforms could offer shareholders.

“There’s no doubt something will give at some point in time, perhaps because of ownership issues, strategy or alignment. If you think about a bank and a platform … what (banks) may try and do again. There’s a couple of banks in that situation, one that’s half in, one that’s in, can they actually invest and build the value proposition that platforms are becoming to make advisers more efficient?” Mr Alcock said.

“These businesses (platforms) can be fabulously attractive in terms of returns to shareholders. If you’re not investing in growth, if you’re not investing in building new technology, then you can actually cut costs out and earn a lot of money on these businesses.

“But at some point, they reach a tipping point where they become legacy. And so you’re seeing in a marketplace where there is a gap emerging between those who are moving forward and those who are sitting still. That at some point will change valuation statistics and change the appetite for shareholders.”

AMP group executive for platforms Edwina Moloney said most advisers were using two platforms for their clients and she expected that to continue. But Mr Alcock said Australia could follow other countries where advisers tended to stick with using just one platform.

“We’re seeing in other countries the percentage of advisers who prefer to standardise on one platform is increasing. In Australia, it’s gone from 18 per cent up to 23 per cent in 12 months,” Mr Alcock said.

“The shift’s occurring around the world, the stats are going up in Australia. I agree that you might want to put your eggs in several baskets, but I think you’ll find the spoils and the benefits of efficiency for clients and advisers will see that trend change over time.”

Mr Alcock was speaking hours after HUB24 released its first-quarter figures. Over the three months through to September 30, HUB’s platform funds under advice rose 8 per cent to $91.6bn. This was a 41 per cent jump on the prior corresponding period and was driven by quarterly net inflows of $4bn and positive market movements of $3.1bn.

The platform also added 195 new advisers over the three months, a 17 per cent lift.

Originally published as Wealth platform consolidation within two years: Netwealth