Ultra-high-net-worth outflows dent Praemium quarterly results

In its results for the December 2023 quarter, Praemium has announced net outflows of $175 million, which came after a $206 million net inflow during the September 2023 quarter.

Praemium SMA inflows for the quarter were $159 million, down from $257 million in the previous quarter, but the results were dragged down by its ultra-high-net-worth platform, Powerwrap, which saw net outflows of $334 million.

Praemium chief executive Anthony Wamsteker pointed to a “small number of key adviser exits” for the jump in outflows.

“The Powerwrap scheme is specifically targeted to advisers with ultra-high net worth clients. Operating in this market segment can lead to greater volatility as flows can be impacted by relatively small numbers of client movements,” said Mr Wamsteker.

“The December quarter’s $334 million net outflow reflects the abnormally large impact of a small number of key adviser exits who have moved from advice groups utilising the Powerwrap platform to non-Powerwrap licensees. Gross outflows from these transitioning advisers exceeded $500 million over the last half year.”

He added that, without any further adviser movements, Praemium has estimated that the outflow rate will continue at a similar pace for a further six to nine months.

“Whilst unfortunate, over the long term, Praemium and Powerwrap clients have typically grown their businesses at strong rates. This should ameliorate the negative impact of the transitions which might arise from the known adviser exits,” Mr Wamsteker said.

Despite the outflows during the quarter, total funds under administration (FUA) hit $48.3 billion, representing a 12 per cent increase year-on-year.

The platform business held a total of $22.9 billion, up 10 per cent on the same period in 2022. Praemium SMAs accounted for $10.4 billion of this number, up 16 per cent, while Powerwrap accounted for $12.5 billion, up 5 per cent.

“Net platform outflows for the quarter to 31 December 2023 were more than offset by $819 million in positive market movement. This is broadly in line with $580 million in positive market movement for the quarter to 31 December 2022,” Praemium said in its results.

Praemium’s VMAAS non-custodial portfolio administration and reporting service had $25.3 billion FUA, an increase of 16 per cent on the December 20022 quarter.

“The strong growth in FUA on VMAAS highlights the tremendous potential of that service. Our non-custodial capability remains market leading and represents a significant opportunity for Praemium,” Mr Wamsteker said.

“Inclusive of the core VMA software offering, Praemium provides comprehensive reporting solutions for approximately $240 billion in assets over more than 60,000 portfolios. Our non-custodial solutions are essential in providing advisers and their clients with a whole-of-wealth view across their investment portfolios.

“In the 1H FY24, Praemium has welcomed 27 new client organisations to the VMA and VMAAS services.”