Total shareholder returns for Hub24 (ASX: HUB) and Netwealth (ASX: NWL) since the start of 2025 to July 24, 2025 were around 50% and 27%, respectively, significantly outpacing the S&P/ASX 300 return of close to 9%.

We’ve revisited our assumptions for Hub24 and Netwealth, given the strong performance, to ensure they are reasonable. We still believe our forecasts adequately balance growth and competition. However, we see a case for reducing our cost of equity to reflect likely low cyclicality.

Consistent market share gains

Hub24 and Netwealth have consistently gained market share within an industry that’s broadly cyclical. Consistent net flows, advisor additions, and product uptake have driven revenue growth through recent market downturns, including sell-offs due to the 2020 coronavirus and 2022 inflation scare.

Barring a tail event, Hub24 and Netwealth will likely capture most of the industry’s net flows and continue growing administered funds over the next five years. Both have consistently high platform net promoter scores, showcasing strong product utility.

Raising Fair Value estimates

We increase our fair value estimate for no-moat Hub24 and Netwealth to AUD 40.00 and AUD 15.20 per share, from AUD 31.00 and AUD 12.30, respectively. This reflects a lowered cost of equity assumption of 7.5%, from 9.0% previously.

Despite this, shares remain materially overvalued. We believe our forecasts are fairly optimistic. We assume both will overtake Insignia as the largest platform operator(s) by fiscal 2030, each with 15% share from 9% each currently. Our five-year projected EBITDA margins average 41% (Hub24) and 52% (Netwealth), also above peers.

We think the market’s bullishness is overdone. Competition is intensifying, which will limit the rate of Hub24 and Netwealth’s net flows and compress fee margins. Flow wins also require significant investments, which we think the market underestimates in its margin expectations.

What might shares be pricing in?

To justify current prices for Hub24 and Netwealth, we’d need to lower their cost of capital to around 3.5%. Alternatively, we’d need to increase our earnings per share growth estimate for Hub24 to 33% per year (versus 19% in our base case) for the next five years, and increase our EPS growth estimate for Netwealth to 31% per year (versus 18% in our base case).

We think this is unlikely given growing competition. We expect Hub24 and Netwealth’s operating market—the platforms space—to ultimately be a multiplayer market with several players holding decent market shares, rather than a winner-takes-all market.

Stiff competition seems assured

This is given compelling industry drivers—most notably compulsory superannuation contributions—which will likely attract competition. Despite Hub24 and Netwealth’s strong financial performance, they operate in a commoditised industry where platforms compete on functionality, customer service, and price.

Both firms benefited from the post-2018 Royal Commission sentiment shift away from major institutional wealth managers like AMP, Insignia, BT, or Colonial First State. However, these institutions have since evolved to comply with regulatory reforms and significantly improved their product offerings, rapidly catching up on features while leveraging superior economies of scale.

For instance, both AMP and Insignia Financial have reported successive improvements in flows in recent quarters, alongside improved client wins and retention statistics. Over the year to March 2025, the major institutional platforms—consisting of BT, AMP, Colonial First State, Macquarie, Insignia, and Mercer—have continued to lose market share but at a slower rate than the last three years.

Barriers to customer stickiness?

Both firms’ attempts to create customer stickiness through deeper integration into client processes face several limitations.

First, this strategy is widely adopted by competitors, who are improving their features catered to support advisor workflow and integrate with external software. Unlike technology firms with economic moats, both firms have constraints on pricing power and building exclusivity.

Notably, advisors are required to recommend products in clients’ best interests—with the main reasons for justifying a product often boiling down to features and fees. Product recommendations are also subject to an annual review.

While Hub24 and Netwealth have historically gained share based on their superior features and prior lethargy among institutional platforms to improve their products, the grounds to recommend platforms based on superior features are less clear than before. This is because platform features are becoming more homogeneous as competitors catch up.

A continuation of this trend would make price the main basis of competition over the long run—manifesting in fee compression which we feel is not being fully accounted for by the market.

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Terms used in this article

Fair Value: Morningstar’s Fair Value estimate results from a detailed projection of a company’s future cash flows, resulting from our analysts’ independent primary research. Price To Fair Value measures the current market price against estimated Fair Value. If a company’s stock trades at $100 and our analysts believe it is worth $200, the price to fair value ratio would be 0.5. A Price to Fair Value over 1 suggests the share is overvalued.