HUB24 announced underlying flows of $638m in the first quarter of FY19 and $755m in the second quarter, slightly ahead of our forecast and up strongly on the same period last year. The transition of $725m from Fitzpatricks Private Wealth in the December quarter resulted in headline flows for the half-year of $2.1bn, up 94%.
We remain confident in our forecast of $4bn of net inflows for HUB24 in FY19, due to additional flows from Fitzpatricks and continued strong underlying flow momentum.
Adviser numbers grew 40% on a year ago, which is a strong lead indicator as it takes time for advisers to ramp up flows onto newly signed platforms.
A critical measure in assessing HUB24’s penetration with existing clients is the amount of funds under administration (FUA) per adviser. Industry estimates place FUA per planner per primary platform at $25–30m and at about $10m per secondary platform. HUB24’s FUA per average adviser currently sits at just $7.2m (up 5% on the same period last year), implying potential upside of up to four times in FUA from existing advisers alone as their books are penetrated.
With the Fitzpatricks deal coming on at a lower revenue margin and competitor BT Panorama’s pricing change driving administration fee deflation, we expect a 46% increase in 1H19 FUA on 1H18 to translate into a 36% increase in revenue and operating leverage, driving a 52% uplift in platform operating earnings.
The platform market was worth $860bn at September 2018. Based on growth rates in superannuation and investment monies on platform, we estimate the market could grow by 7.7% per annum out to FY26. We see HUB24 benefiting from the trend towards independent advice driven by the Royal Commission, client and adviser distaste for vertical alignment, and improved third-party technology and services promoting independent licensing.