Praemium's funds under advice surges over $8b

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Platform provider Praemium's funds under advice surges over $8b

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Michael Ohanessian says Praemium is capitalising on "significant change" in the wealth management sector.
by Alice Uribe

ASX-listed Praemium's shares surged more than 14 per cent as it becomes the latest speciality platform provider to steal market share from the big four banks and AMP.

In an announcement to the ASX on Thursday, Praemium reported a 34 per cent uptick in quarterly flows, which pushed its funds under advice (FUA) up 35 per cent for the year to $8.3 billion.

Australian inflows for the June 2018 quarter of $566 million were the third-highest on record, with investors bumping Praemium's share price up 14.53 per cent to almost 98¢ when the market closed on Thursday.

Praemium is among a cohort of tech-savvy listed investment and administration platforms, used primarily by financial advisers, that is proving to be a real challenge to the big bank platforms such as CBA's CFS, AMP's MyNorth or Westpac's Panorama.

According to a Credit Suisse review of the Australian platform market over the past five years, specialist platforms (including Netwealth, Hub24, OneVue, Praemium and managedaccounts.com.au) have increased their market share from 0.9 per cent of FUA in March 2013 to 4 per cent in March 2018.

"Over the same period, the institutional platforms – those owned by the major banks, AMP, Macquarie and IOOF – lost market share, which fell from 88.2 per cent to 84.7 per cent," said Credit Suisse.

The trend is prompted by the exodus of financial advisers from big banks to non-bank advice groups, with these planners preferring to direct client money to so-called speciality platform providers.

According to Adviser Ratings, wealth management giants IOOF and AMP are at most risk of losing advisers, with more than 1200 planners leaving the big banks in the past three years.

At the same time, the establishment of self-licensed practices has driven a 33 per cent increase in licensees.

"With significant industry forces driving change, particularly in Australia but also across global markets, we are well placed to benefit from the move to transparent and efficient adviser and investment solutions," said Praemium chief executive Michael Ohanessian.

Of the speciality platform providers, Hub24 was the fastest organically growing platform, with FUA up 58 per cent year on year and gaining 0.3 per cent market share over the past year, said Credit Suisse.

"Hub24 attracted 12 per cent of industry annual net flows despite having only 0.9 per cent market share of FUA," said the investment bank.

By way of comparison, for the year to March Praemium attracted 6 per cent of industry annual net flows despite having only 0.6 per cent market share of FUA.

Platforms owned by incumbent institutions currently manage the lion's share of the nearly $888 million platform market. AMP has $158 billion in funds under management, followed by Westpac with $146 billion and CBA with $130 billion.

But an Investment Trends 2018 planner technology report revealed 94 per cent of planners would shift software or platform providers if there was better technology. For the fifth year in a row, Netwealth was the leader in planner satisfaction, followed by CFS' FirstChoice platform and Hub24 in third place.

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