Post Market Wrap | Netwealth’s $2.6 billion net funds inflow for Funds Under Advice in March quarter
- Negative $1.7 billion market movement for Funds Under Advice in March quarter
- Funds Under Management net funds inflow of $0.5 billion in March quarter
- Platform market share increased from 4.4 percent to 5.5 percent for year to December 2021
- Launch of refreshed administration service aimed at High Net Worth and Ultra High Net Worth market segments should support FUM and FUA growth
- Higher RBA official cash rate will boost proprietary cash transaction account margin from FY23.
March 2022 Quarterly business update
Netwealth continues to grow Funds Under Administration (FUA) and Funds Under Management (FUM), despite a negative $1.7 billion mark-to-market movement in FUA, during the March quarter.
FUA net inflows of $2.6 billion were recorded during the March quarter, taking FUA to $57.6 billion at 31 March. However, FUA at 31 March increased by a lesser amount of $0.9 billionnet for the quarter. This is the result of negative market movement of $1.7 billion on client portfolios during this 3-month reporting period. The market movement for the 12 months to March 2022 was positive $2.4 billion, contributing to the 37 percent increase of $15.7 billion in total FUA.
FUM net inflows for the March quarter were $0.5 billion, taking the total FUM at 31 March to $13.8 billion, an increase of 31 percent compared to March 2021.
Netwealth’s increasing market share continues to lead the industry for FUA net inflows for the rolling 12-month period to December 2021, taking its market share to 5.5 percent, up from 4.4 percent a year earlier. This increase positions Netwealth as Australia’s fastest growing platform provider.
The number of member accounts at 31 March stood at 111,130, an increase of 19,122 accounts or 21 percent for the 12 months since March 2021.
Apart from these market-leading quantitative measures, Netwealth ranks highly in terms of a peer analysis, based on qualitative measures. The Investment Trends December 2021 Platform Competitive Analysis and Benchmarking Report, ranked Netwealth first for platform overall and first for Reporting and Transaction Tools. Netwealth has invested significant amounts on its software and related platform technology in recent years. This investment is reflected in the superior rankings in terms of platform functionality, in a highly competitive operating environment.
The Group’s outlook statement did not include a full year earnings projection.
Netwealth did however state that its win rate for new business is strong across all market segments. The launch of the Group’s upgraded non-custodial administration service in the final quarter, aimed at the High Net Worth and Ultra High Net Worth market segments, should continue to support solid growth in FUM and FUA over the medium term. Netwealth significantly increased headcount in the first half-year of FY22, resulting in a 32 percent increase in employee benefits, totalling $7.6 million. Much of this increase relates to the Group’s IT capability and is expected to deliver enhanced service levels to clients and improved operating efficiencies as the Group builds scale in future years.
A higher RBA official cash rate from the current 0.01 percent will boost the margin on the Netwealth cash transaction account from FY23. The Netwealth cash transaction account represents 6.8 percent of FUA at 31 March, up from 6.1 percent of FUA at 31 December 2021.
Netwealth’s robust FUA sales pipeline, high EBITDA to cash conversion ratio and no debt, is supportive of consistent earnings performance over the medium term.
This Post Market Wrap is presented by Kodari Securities, written by Michael Kodari, CEO at KOSEC.
When will airfares begin to fall?
As the global aviation market rebounds, airlines are changing their service offerings
Over 46 million workers in the global aviation sector lost their jobs as global aviation came to a grinding halt at the onset of the pandemic.
However, Geoffrey Thomas from AirlineRatings.com said passengers have returned to airport terminals and boarded flights in droves.
“When travelled returned, many of us wondered what sort of low airfares will we have to be charged to entice people back onto airplanes.”
In February 2023, total traffic (measured in revenue passenger kilometres) rose 55.5 per cent when compared to February 2022.
Globally, traffic is at 84.9 per cent of February 2019 levels.
“It was a stampede, the likes of which we have never seen before,” Mr Thomas said.
The worst of inflation could be behind us
The unprecedented nature of the pandemic continue to shape international fiscal policy
As reserve banks and federal reserves continue to battle the impacts of Covid-19, inflation has become a dominate issue.
In some parts of the world, rising household costs have slowed consumer spending by more than expected.
It means the end of aggressive rate hikes could come to an end in a matter of months.
In Australia, recent data from the Australian Bureau of Statistics confirmed inflation has passed its peak and is beginning to moderate.
The numbers show annual inflation peaked in December 2022 but will still remain higher for longer than anticipated.
Matt Grudnoff is a Senior Economist at The Australia Institute, who said these are uncharted waters.
“I don’t think they should be fully blamed.
“The pandemic was an entirely different kind of recession, one that we have never seen before.
“The world went into recession because the world shut down for very good health reasons.
“But the economy rebounded extremely quickly, simply because there was no underlying problem with the economy,” he said.
“I think there is a great risk”: will AI steal our jobs?
Artificial Intelligence has become an increasingly powerful and pervasive force in our modern world.
Artificial intelligence is not a new concept. However, the growing advancements have the potential to revolutionise industries, improve efficiency, and enhance the quality of life.
Along with its promising advancements, artificial intelligence also brings certain risks and challenges that must be acknowledged and addressed.
It has become the focus of lawmakers, who are working towards greater regulation of the sector.
U.S. and European Union officials recently met in Sweden to weigh up the benefits and challenges of artificial intelligence, and other emerging technologies.
“The AI process is creeping up on us,” said Dr Keith Suter, who is a global futurist.
“You’ve got competition between companies.”
It’s almost like some of us can see this raft that’s heading towards the rapids and a disappearance towards the waterfall, and we’re giving a warning but it’s not being heeded because everybody’s in this race to get down to the river,” Dr Suter said.
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