Hub24 vs Netwealth: A Deep Dive into Australia’s Platform Providers

Hub24 and Netwealth are leading Australian financial services companies known for their investment and superannuation platform offerings. They’ve emerged as tech-driven disruptors in wealth management – consistently ranking #1 and #2 in net inflows and platform functionality.

We’ll compare Hub24 and Netwealth's business models, growth strategies, moats and financials. We’ll see how these upstarts rose against legacy players, how they make money, what sets their strategies apart, and why investors value them highly.

Hub24 and Netwealth: Rise of the New Platforms

Hub24 and Netwealth operate investment platforms that help financial advisers manage client portfolios and superannuation. Their modern "wrap" platforms consolidate diverse investments (shares, managed funds, cash) into one system, offering comprehensive tools for trading, reporting, and portfolio management. Their user-friendly technology has attracted advisers away from traditional bank-owned platforms.

Rise vs. Legacy Players

Over the past decade, independent platforms like Hub24 and Netwealth have gained market share as regulatory reforms (2009-2012 Ripoll Inquiry, FOFA, and 2018 Royal Commission) targeted high-fee legacy products. Major banks exited wealth management, creating opportunities for specialists with superior technology.

Today, Hub24 and Netwealth rank among Australia's top platform providers, jointly leading industry net inflows, each administering $80-90 billion in funds (FUA), up from nearly zero a decade ago. Their market share has reached approximately 7-8% each, while legacy giants like Insignia (IOOF/MLC) and BT/Westpac maintain around 20% but continue losing ground.

How Do Hub24 & Netwealth Make Money?

Both companies have similar revenue models centred on “clipping the ticket” on the large pool of investment funds they administer. Their primary income streams include:

• Asset-based administration fees: The core revenue comes from tiered percentage fees on Funds Under Administration (FUA), typically starting around 0.50% and scaling down to an average of about 0.30% for larger balances. As FUA grows through market gains or new inflows, administration fees increase proportionally. Platforms secure a steady revenue stream with compulsory superannuation, continuously directing money into investment accounts.

• Cash account and interest margins: Both platforms earn interest on client cash balances held for transactions and distributions. They pay clients a fixed rate while keeping the remainder as revenue—a stream that becomes significant when interest rates rise. For example, Netwealth's custodial clients kept about 5.5% of FUA in cash as of December 2024, generating a margin of hundreds of millions of dollars. The 2022-2023 interest rate increases substantially boosted this income source for both companies.

• Transaction and ancillary fees: They earn various smaller fees such as brokerage/transaction fees on trades, account establishment fees, managed account fees, or ancillary admin fees. These are less significant than the recurring admin and cash fees.

• Other services (for Hub24): Hub24 has expanded into additional services via acquisitions (described below). It now earns some revenue from businesses like Class Ltd, an SMSF administration software provider, and PARS (Portfolio Administration and Reporting Service), a non-custodial admin service for brokers/advisers. These bring in software subscription and service fees beyond the core platform revenue.

Fee margins have gradually declined despite growing FUA, with Hub24's revenue margin falling from ~0.57% in 2018 to ~0.32% by 2023. Both companies have passed scale benefits to clients through lower fees, limiting pricing power but maintaining consistent profit growth due to the expanding market—comprising $3.5 trillion in Australian household assets and approximately $4 trillion in superannuation pools.

Key Differences in Growth Strategy

Despite their similar business models, Hub24 and Netwealth have taken different paths to growth. Here are some key contrasts in their strategies:

Netwealth: Organic Growth & Adviser Loyalty: Netwealth has built its success on reputation and service among financial advisers, focusing on high-net-worth clients as a premium platform offering. Consistently leading industry surveys with 91.5% functionality satisfaction according to Investment Trends, Netwealth has gained strong brand recognition through platform enhancements rather than acquisitions. Their approach centres on winning adviser mindshare through platform excellence and leveraging positive word-of-mouth to drive inflows.

HUB24 – Acquisition-Fuelled Ecosystem Expansion. Unlike Netwealth, Hub24 has aggressively expanded through acquisitions, building an integrated "platform of the future." Key acquisitions include:

• Xplore Wealth (2020), adding $15 billion FUA

• PARS (2020), a $10.5 billion non-custodial portfolio service

• Class Limited (2022), a leading SMSF administration software ($386 million); and

• Myprosperity (2022), enhancing adviser tech tools.

This strategy has created a comprehensive ecosystem covering custodial platforms, non-custody solutions, and SMSF administration, aiming to "simplify the Australian wealth landscape." Though requiring more integration work, this approach has accelerated Hub24's growth.

Competitive Advantages

Investors pay a premium for Hub24 and Netwealth because they exhibit traits of high-quality companies with a strong “moat” that have scaled quickly with high margins and entrenched positions in the sector. The market has assigned them premium valuations based on high-quality earnings (recurring, scalable, capital-light) and strong industry positioning.

Sticky Customer Base (High Switching Costs)

• Changing platforms is complex, time-consuming, and risky for investors and advisers.

• Migration requires extensive paperwork, potential tax consequences, staff retraining, and back-office restructuring.

• This inertia creates high retention rates and reliable recurring revenue.

Network Effects and Scale

• Growth attracts more third-party integrations (fund managers, software providers, data feeds)

• Larger platforms negotiate exclusive integrations and early access to new investment products.

• Scale generates data and feedback to improve features and user experience

• Operating leverage means core costs don't rise proportionally with FUA, creating exponential profit growth

Structural Tailwinds

• Australia's mandatory superannuation system (11.5% of wages, rising to 12%) ensures continuous capital flow.

• The aging population drives more people to seek financial advice and platform solutions.

• Compulsory contributions and rising asset prices provide long-term growth visibility. 

Financials, Valuation and Balance Sheet

Netwealth 1H FY25 Highlights

• Platform revenue: $150.8M (+25% YoY)

• NPAT: $57.6M (+46% YoY)

• Strong margins: EBITDA >50%, NPAT >37%

• Excellent cash generation: $75.3M operating cash flow

• Debt-free with healthy cash reserves

• Increased dividends: 17.5 cents per share (up from 14.0cps)

HUB24 1H FY25 Highlights

• Total revenue: $195.2M (+25% YoY)

• NPAT: $36.5M (+75% YoY)

• EPS growth: ~55% YoY

• Strong cash position: $73.1M (up from $30.8M)

• Doubled operating cash flow to $66M

• Interim dividend: 24 cents per share

Valuation Considerations

By conventional measures, both companies look expensive. Netwealth’s share price of $25.80 equates to around 49× forward earnings. Hub24, at $67 per share, trades at a lofty forward earnings multiple of 52.9x. These valuations are far above the market average. However, investors have been willing to pay this premium for the growth and stickiness. Both companies are expanding FUA at 20–30% annually, leveraging that into 30%+ profit growth, and have decades of compounding ahead if they maintain momentum. Their return on equity is high, capital needs are low, and income is largely recurring – a profile that usually commands high multiples.

The Bottom Line

Hub24 and Netwealth have transformed Australia's wealth management landscape through superior technology and service, displacing legacy institutions. Both operate a "toll road" business model, collecting fees on growing investment assets and generating high-margin and recurring revenue. Netwealth built its position through innovation and adviser relationships, while Hub24 expanded aggressively via acquisitions. These approaches have positioned both companies at the forefront of Australia's expanding superannuation and investment market.

Their competitive advantages stem from client stickiness and scale efficiencies, though they must maintain execution to counter competitors. Premium valuations and strong stock performance reflect investor confidence in their growth trajectory. They exemplify the triumph of "new wealth tech" over traditional models—a disruption that markets have handsomely rewarded.

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DISCLAIMER: Please note that the information provided in this newsletter is for educational purposes only and should not be considered financial advice. It is not intended to encourage you to buy/sell assets or make economic decisions. We strongly recommend conducting your own research before making any investment.