Positive HUB24 tailwinds to fall away in FY26: Morningstar
Despite reporting strong quarterly results, Morningstar forecasts initial tailwinds benefiting HUB24 in recent years are likely to fall away in the next financial year.
Earlier this week, the platform announced quarterly net inflows for the three months to 31 March of $4.9 billion, up 39 per cent on the prior corresponding period, with $1.3 billion coming from a large migration. Platform funds under administration (FUA) was $102.5 billion, an increase of 29 per cent from the FY24 March quarter.
The $4.9 billion was lower than flows in the previous quarter, and Morningstar said it expects “prior outsize growth” is likely to moderate going forward into the next financial year.
The earlier growth had been driven by delivering a superior service to rivals, advisers seeking new fee sources, such as managed accounts, and regulation resulting from the Hayne royal commission and Future of Financial Advice reforms.
But compared to net inflows being 23 per cent of FUA in fiscal 2025, this could fall to 9 per cent to FUA by fiscal 2029, it said.
In an analyst note, it said: “We maintain our forecast for reduced net inflows from fiscal 2026 onwards due to volatility and improved products from rivals.
“The moderating rate of net inflows and slower growth in flows per adviser, relative to the last three quarters, align with our view that prior outsize growth was largely cyclical – driven by a rebound in fund flows following weaker levels in fiscal 2023–24 – and is likely to cool.
“Given HUB24 remains relatively subscale to incumbent platforms and the tight regulatory scrutiny, we don’t expect the firm to win a price war, nor can it charge a premium for its products. Fee compression and growth investments are likely to limit the degree of operating leverage it can achieve.”
HUB24 has regularly been voted as the top platform for advisers, but Morningstar said competition is likely to narrow with its nearest rival Netwealth which is developing its own in-house systems. In Netwealth’s quarterly results, it said it is reducing its reliance on third-party systems for core platform functions and expects headcount to increase and investment in capitalised software to increase by $2 million.
Morningstar said: “HUB24 has previously cited in-house systems as a key advantage, enabling faster product development and greater customisation compared to peers like Netwealth. However, in its latest update, Netwealth announced plans to reduce its reliance on third-party systems and invest in developing essential platform features via its own in-house systems.
“Developments like this reinforce our view that any improvements in platform features are likely to be replicated, resulting in competing offerings all having similar functionality – shifting the basis of long-term competition towards pricing.”
AUTHOR
Laura Dew
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