At a media lunch in Sydney on Wednesday, Tony Nejasmic, head of distribution and marketing at Xplore Wealth, commented on the competitive process that platform providers follow to win business from large wealth managers.
“We are called upon for all types of transactions. We have an issue going right now. You win deals and you lose deals on a number of things. Sometimes it’s the price, sometimes it’s the technology and sometimes it’s the brand name. Sometimes it’s a mix of all of those,” he said.
“What we are seeing in the market is a large number of deals being done at very low prices. We just don’t think it’s sustainable. Platforms buy business. You see that on some of the platforms listed, their margins are compressing, as new deals are being closed at a much lower rate than historical deals.
“The problem you have with that is when these historic contracts come up for renewal, and a lot of them are on three-year contracts, you’re not getting the same rate as you did three years ago. years. There is a bit of a race to the bottom when it comes to pricing for platform providers.
Last month, platform provider Netwealth announced that it had been selected by ANZ to provide its services to ANZ Private. The deal includes a $3 billion FUM opportunity for Netwealth.
Despite pricing pressures from competitors, Netwealth says it continues to win business. Last year, BT Panorama announced significant price reductions for its platform.
“Management says Netwealth continues to win customers despite rivals cutting fees, and that the royal commission into the financial services sector will be a tailwind for the business,” Morningstar analyst Gareth James commented. in the December 2018 Netwealth Quarterly Update.
“However, the quarterly update looks a little soft compared to its main competitors HUB24 and Praemium, both of which recorded record inflows for the December quarter, although lower in absolute terms than Netwealth’s growth,” a he declared.
Netwealth FUA reached $21.1 billion as of March 31, 2019. Net inflows from the group’s managed accounts contracted by 8.6 percent compared to the March 2018 quarter.
Xplore Wealth had $13.3 billion in assets under administration, including over $2.6 billion in direct international securities as of February 28, 2019.
HUB24 FUA reached $11.5 billion as of March 31 this year, following a record quarter in March, attracting nearly $800 million in net inflows.
In its quarterly update last month, HUB24 said it was benefiting from advisors moving clients from traditional platforms. However, the group noted that the focus on FUA’s assisted transition activity, which it said involves “a transfer of assets into cash”, is leading to lower initial cash balances on the platform and a reduction in asset trading.
“That, combined with advisors moving client cash into the market as it rebounds, increasing average account balances and the impact of ladder-based pricing for a significant transition, completed in December 2018, has an impact on revenue margins.”
HUB24 expects its revenue margins to contract by 6% compared to 2019
“Revenue margins tend to fluctuate depending on the level of platform trading activity, client cash balances, the level of assisted transitions into the new business mix, as well as cyclical conditions,” it said. the group.
