As the financial services and wealth management industry picks through anecdotal examples of damage in the wake of the Hayne royal commission findings, the latest platform flow data shows the most tangible evidence yet of a backlash.
Institutionally owned platforms that suffered the most brand damage in 2018 – and for which there are low-cost substitutes among industry fund offerings – recorded the largest outflows for the period to the end of September, Credit Suisse noted, pointing to the latest data from Strategic Insight.
In the Sept 2018 quarter, platforms for the major banks and AMP showed $3.3 billion in net outflows – a $4.5 billion swing from the $1.2 billion of net inflows for the same period a year ago, Credit Suisse analyst James Cordukes highlighted.
In contrast, industry funds generated $10 billion of net inflows during the quarter, Cordukes pointed out. Meanwhile, so-called specialist platforms HUB24 and Netwealth, which are listed on the Australian Stock Exchange, also had net inflows onto their platforms.
While Credit Suisse linked this shift in client assets to the findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, Cordukes also noted that retail funds generally have a higher portion of their assets in pension phase, which could amplify their outflows.
Further, Strategic Insight senior manager Daniel Morris noted that fund flow data includes open and closed products, which can reflect negatively on older providers when compared to newer market entrants.
Quirks in the data aside, the net outflows for institutionally owned platforms are an early sign of damage from the early rounds of the royal commission, which shone a spotlight on the advice industry in April, HUB24 chief executive Andrew Alcock reckoned.
“Advisers and consumers are rethinking who they’re working with,” Alcock said. “That’s what we are hearing in the market – from advisers in particular, who are talking to us because they’re uncertain or concerned with the direction or ownership of their existing platform providers.”
HUB24 and Netwealth, while having some of the fastest-growing funds under advice totals amongst their peers – as measured by Strategic Insight – are newer entrants that continue to maintain a smaller footprint than their institutionally owned counterparts.
Markets provided saving throw
While the headline findings from the Strategic Insight data appear to show strong growth in the platform market overall, Credit Suisse highlighted that an unusually high contribution from markets was required to offset a record fall in net inflows for the period.
Stripping out the effect of rising investment markets, flows in the September 2018 quarter were the worst on record for the last 15 years.
“While strong markets have supported growth in the year to Sept 2018, the fourth quarter of calendar year 2018 is unlikely to reap the same benefits, given equity markets have fallen approximately 10 per cent, although we note platforms are partially insulated from this due to a tiered pricing structure,” Cordukes said.