Netwealth Group’s Record Growth and Strong Superannuation Performance

About Netwealth Group Limited

Netwealth Group Limited (ASX: NWL, Netwealth or the Group) is a rapidly growing financial services business founded in 1999 that listed on the ASX in November 2017. Netwealth considers itself to be a technology company, a superannuation fund, and an administration business. Netwealth employs its own technology team which has built its proprietary digital platform that has market-leading functionality, giving Netwealth a durable competitive edge over many of its competitors. The Group’s financial products include superannuation, investor directed portfolio services, managed accounts and managed funds, as well as self-managed superannuation funds administration services.

Two consecutive quarters of record growth

Record quarterly Funds Under Administration (FUA) net inflows of $4.5 billion for the December quarter point to continued out-performance and higher earnings for Australia’s leading wealth management and technology business.

The record quarterly net inflow of FUA for the December quarter is the second record consecutive quarter of FUA growth following the previous record of $4 billion in net inflows achieved in the September quarter. This record 6 months of net inflows takes the 12 months to December 2024 total of net inflows to $15 billion and the total FUA to $101.6 billion as at 31 December 2024. The total number of new accounts for the December quarter was 4,272, lifting the total number to 151,43, representing an increase of 14 percent for the 2024 calendar year.

Other areas of the business exhibited continued strong growth, including Netwealth’s non-custodial product offering, launched in March 2023, which increased by 204 percent over the 12 months to 31 December 2024 to reach $694 million.

Funds Under Management (FUM) increased by $1.5 billion during the quarter to $24 billion at 31 December 2024, including FUM net inflows of $1.2 billion for the quarter. The Managed Account balance was $20.8 billion at 31 December 2024, a 7 percent or $1.4 billion increase for the quarter, with net inflows of $1.1 billion. The increased balances other than net inflows relate to positive mark-to-market valuation movements.

These impressive growth numbers are also attributable to significant product enhancements implemented during the year that include improvements to the platform user interface, mobile app, advisor workflows, and the suite of managed models.

Netwealth leads the industry with its innovative, ‘adviser-friendly’ investment platform that achieves consistently high transition rates from existing financial intermediaries and legacy platforms, and strong conversion rates from the Group’s new business pipeline across all client groups and segments.

The benefit of a strong Superannuation Compliance Regime

Significantly, Retail Superannuation comprises 34 percent of Netwealth’s Funds Under Administration, or $35 billion. The significance of superannuation is that it is a ‘sticky’, stable, and long-term pool of funds that delivers predictable and dependable recurring earnings year after year to Custodians like Netwealth. Today approximately $4 trillion sits in this superannuation pool. This has not escaped the attention of the Reserve Bank of Australia.

The RBA has observed that the $4 trillion Superannuation Industry directly holds nearly one-third of all bank short-term debt securities and that during the global pandemic, Superannuation Funds ramped up the sale of short-term debt securities back to the issuing banks, adding to the funding pressures and funding costs of the Australian banking system. The RBA considers that this situation poses systemic risk to the Australian banking industry and the economy more generally.

In response to these circumstances, the Australian Prudential Regulation Authority oversees a regulatory regime that now takes an active interest in the Superannuation Industry.

This regime includes licensing requirements and a range of regulatory and prudential compliance obligations to protect the interests of Superannuation Fund beneficiaries. These obligations provide for minimum liquidity and capital requirements for Registrable Superannuation Entities (RSEs) and are a barrier to entry that imposes direct and opportunity costs on RSEs.

Superannuation Fund Custodians like Netwealth that have operational scale can more readily comply with such requirements and absorb the associated costs, compared to smaller players. Accordingly, an increasingly regulated Superannuation Industry is a positive development for Netwealth and is a source of stability for Australia’s financial system more than it is a potential risk.