Portfolio Update: Purchase of Netwealth (ASX: NWL)

Portfolio Update:
Purchase of Netwealth (ASX: NWL)

17th April 2025

Across the Australian component of investor portfolios (Growth Tilt), we have bought Netwealth (ASX: NWL).

Netwealth is a leading technology company offering an investment platform to financial service intermediaries and investors within the wealth management industry. Netwealth operates within the Australian Wrap, Platform and Master Trusts market. We view Netwealth as a high-quality business with a long-term prospect of generating above average revenue growth with very high profit margins and returns on capital.

We are attracted to Netwealth for the following reasons:

Market leading platform offering
High levels of reinvestment into maintaining and improving the quality of the offering
Long runway for future growth
High margins and strong balance sheet allow for going investment in growth

Netwealth has three key levers for value creation

Reinvestment improving their offering and the business
Industry tailwinds assisting growth
Market share gains

Firstly, we believe Netwealth has a technology advantage which not only allows for superior functionality and client value but also allows the business to generate market leading profit margins and return on investment. Management has been disciplined in reinvesting profits back into the business, further driving innovation, its technology advantage and the client experience.

Secondly, post the Hayne Royal Commission in 2019 the wealth management industry has undergone a structural change with financial intermediaries moving away from the large legacy organisations. This has benefited Netwealth by driving advisor adoption from roughly 1 in every 10 advisors in 2019 to 1 in 4 today. We believe Netwealth can continue to grow its client base whilst also capturing a larger share of each advisor’s business.

Finally, the industry is both large, $1.1 trillion under administration as at June 2024, and growing at rates well above GDP growth, 6.3% per annum for the last 10 years. Despite the business’s growth, Netwealth still only accounts for circa 7.9% of overall industry FUM. We believe Netwealth can double its market share over the coming 10 years.

The purchase of Netwealth has been funded via the reduction of existing holdings within the portfolio.

As always, thank you for your ongoing support, it is very much appreciated. If you have any questions or would like more information, please contact your adviser.

Warnings and disclosures

This material has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in this material is General Advice and does not take into account any person’s individual investment objectives, financial situation or needs. Before making an investment decision based on this advice you should consider whether it is appropriate to your particular circumstances, alternatively seek professional advice. Where the General Advice relates to the acquisition or possible acquisition of a financial product, you should obtain a Product Disclosure Statement (“PDS”) relating to the product and consider the PDS before making any decision about whether to acquire the product. You will find further details of the service we provide and any cost to you within the Financial Services Guide. Any references to past investment performance are not an indication of future investment returns. Prepared by EP Financial Service Pty Ltd ABN 52 130 772 495 AFSL 325 252 (“Elston”). Although every effort has been made to verify the accuracy of the information contained in this material, Elston, its officers, representatives, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this material or any loss or damage suffered by any person directly or indirectly through relying on this information.