Netwealth sees silver lining in Hayne recommendations

This week, Netwealth released its first-half profit results, posting an underlying NPAT of $17 million for the six months to 31 December 2018, up 21 per cent on the prior corresponding period.

In its trading update, the group said that it believes that “many of the recommendations of the royal commission will lead to further growth of our core business”.

Netwealth said the phasing out of grandfathered commissions is expected to be a positive impetus for growth.

“The estimated potential industry-wide FUA subject to grandfathered commission was $189 billion, at June 2018,” the company said.

“The removal of grandfathered commissions is likely to result in greater transitions of legacy business which will benefit Netwealth.”

The company said that less than 3.5 per cent of its FUA is subject to grandfathered commission and the removal of grandfathered commission will not negatively impact Netwealth’s net revenue. As a result of disposing of its advice businesses in 2017–18, Netwealth has no residual liabilities in respect of advice.

The company believes it is well placed to provide functionality to support the increased compliance and regulatory requirements for licensees and advisers and sees opportunities in the royal commission’s recommendations for the superannuation industry.

“The royal commission recommends that superannuation fund trustees should act in no other capacity,” the company said.

“Subject to the form of amending legislation and regulatory approval, we intend to establish a wholly-owned subsidiary as the trustee of the Netwealth Superannuation Master Fund in place of Netwealth Investments Limited.”

Netwealth confirmed that the new trustee company will require $5 million of regulatory capital, which will be funded by existing cash holdings.