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Netwealth share price on watch after record quarter

The Netwealth Group Ltd (ASX: NWL) share price will be on watch today following the release of a business update.

What did Netwealth announce?

This morning the investment platform provider released its update for the first quarter of FY 2020.

According to the release, Netwealth achieved record net inflows during the quarter despite the Reserve Bank cutting the cash rate. There had been concerns that its platform would struggle if its cash accounts were generating negative returns after fees. But this clearly hasn’t been the case.

During the quarter its Funds Under Administration (FUA) grew $2 billion or 8.5% quarter on quarter to $25.3 billion. This was a 31.3% increase on the prior corresponding period.

The majority of its FUA increase in the September quarter came from fund inflows. Netwealth reported net inflows of $1.5 billion, with favourable market movements accounting for the remaining $0.5 billion increase in FUA.

Pleasingly, these fund inflows were from a diverse range of clients. Management advised that no single client represented more than 8% of the net inflows.

Also rising strongly was its Funds Under Management (FUM). They increase $0.5 billion of 12.6% during the quarter to $4.4 billion. This comprised $3.1 billion for its Managed Account and $1.3 billion for its Managed Funds.

The release also advised that its fund inflows performance during the June quarter was ranked highest by Strategic Insights. This led to Netwealth’s market share increasing to an estimated 2.6%. Given that it was awarded the SMSF platform provider of the year at the Momentum Media SMSF awards in July, this news won’t come as a big surprise to shareholders.

Outlook.

Management advised that industry trends continue to support strong and sustainable growth. This is due partly to many major banks and institutions exiting or rationalising their advice businesses.

It also notes that it has a strong pipeline of new business that has been won, but has not yet transitioned to its platform, and continues to see new opportunities. And while pricing remains competitive, it believes its pricing strategy remains effective.

Overall, I think this update should settle a lot of nerves and demonstrates why Hub24 Ltd (ASX: HUB) and Netwealth could be great long-term investments along with these hot growth stocks.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Hub24 Ltd and Netwealth. The Motley Fool Australia has recommended Hub24 Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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