Here’s why the Netwealth (ASX:NWL) share price has surged 25% this week

Netwealth shares have risen a lot this week.

| More on:
Fintech tablet display in 3D

Image Source: Getty Images

The Netwealth Group Ltd (ASX: NWL) share price has risen by around 25% in the past week.

Considering its market capitalisation was already in the billions, that is a significant increase in a short amount of time.

On 14 October, the business released its quarterly business update and outlook for the three months to September 2021.

Netwealth quarterly update

Netwealth said that funds under administration (FUA) at 30 September 2021 was $52 billion. That was an increase of $4.8 billion (a 10.2% increase) for the last quarter, including market movements of $0.8 billion. Year on year, the increase was $17.9 billion (an increase of 52.7%), including a positive market movement of $6 billion.

The FUA net inflows for the September quarter were $4 billion, which was 111% more than the prior corresponding period. Of the total FUA, net inflows from two clients contributed approximately $0.9 billion. The rest of the inflows were “well diversified”.

Turning to funds under management (FUM), it reached $12.6 billion at 30 September 2021, which was a 7.7% increase (or $0.9 billion) for the quarter and an increase of 56.9% year on year ($4.6 billion in dollars).

FUM net inflows were $0.9 billion for the quarter, including $0.7 billion of managed account net inflows.

The managed account balance was $10.7 billion at 30 September 2021, an increase of 63.6% year on year.

The Netwealth share price has risen almost 20% since this announcement.

How fast is it growing compared to the competition?

Netwealth said it continued to lead the industry for FUA net inflows, as reported in the ‘Plan for Life’ quarter platform market update. It recorded the largest FUA net inflows of $9.8 billion for the 12 months to 30 June 2021.

At 30 June 2021, its market share increased to 4.9%. That was an increase of 1% over the prior 12 months.

It is the sixth-largest platform, behind IOOF Holdings Limited (ASX: IFL), Westpac Banking Corp (ASX: WBC) / BT, AMP Limited (ASX: AMP), Commonwealth Bank of Australia (ASX: CBA) / Colonial and Macquarie Group Ltd (ASX: MQG). It’s also growing at a faster pace than Hub24 Ltd (ASX: HUB).

Outlook for Netwealth and its share price

The outlook may be factoring into investors thoughts about the Netwealth share price.

It said:

The ongoing structural changes within the financial services industry continue to support and increase Netwealth’s addressable market and growth opportunities.

As a result of these changes our pipeline for new business remains very strong across all market segments.

The business upgraded its FUA net inflow guidance for FY22 from $10 billion to approximately $12.5 billion. That was due to the record net inflows from the last quarter and the growth that is in its “substantial” new business pipeline.

Should you invest $1,000 in Netwealth right now?

Before you consider Netwealth, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Netwealth wasn't one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Hub24 Ltd and Netwealth. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited and Netwealth. The Motley Fool Australia has recommended Hub24 Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Financial Shares