Netwealth’s record FUA points to a bigger managed accounts opportunity

Record FUA meets lower FY27 flow guidance

Netwealth Group Limited (ASX:NWL) has reached a fresh scale milestone, lifting total funds under administration to $139.2 billion at the end of September. FUA rose $3.4 billion, or 2.5%, during the quarter and was 15.2% higher than a year earlier, although the company has moderated its expectations for the year ahead.

Netwealth now expects FY27 FUA net flows of $17 billion to $19 billion, down from its previous range of $18 billion to $20 billion. The revised guidance is stated on a pre-Paradino basis. The company attributed the quarter’s more cautious operating environment to market volatility, uncertainty around interest rates and proposed legislative and tax changes whose final form and timing remain uncertain.

Custodial inflows remained substantial at $7.8 billion. Netwealth reported FUA net flows of $3.6 billion after excluding $0.4 billion of pension payments and $0.6 billion of outflows from two institutional clients. Superannuation inflows excluding SMSF rose 16.8% from the prior corresponding period to $2.7 billion, with the company pointing to the commencement of Payday Super on 1 July 2026 as a contributor to stronger contribution flows.

Managed accounts provide the clearest growth engine

Funds under management delivered the quarter’s strongest operating signal. FUM net flows reached a record $2.4 billion, including $2.2 billion from Managed Accounts and $0.3 billion from Managed Funds. Total FUM rose 24.0% year on year to $36.6 billion, while Managed Account FUM climbed 26.0% to $32.4 billion.

Managed Accounts now represent 23.3% of total FUA, up 200 basis points over 12 months and 80 basis points in the quarter. Netwealth added 33 Managed Account models during the period. The platform also added 3,822 net new accounts, taking the total to 186,098, while 21 new financial intermediary relationships lifted the total to 4,226.

The quarter also advanced two of the company’s newer distribution threads. Netwealth’s Individual HIN service launched on 1 July, while the expanded Morgan Stanley Wealth Management Australia platform deal has begun transitioning client FUA in stages. That agreement followed the earlier Morgan Stanley platform expansion, which added a domestic platform for ASX-listed equities and investments.

Paradino adds investment and execution risk

The proposed acquisition of AI-enabled adviser workflow business Paradino remains on track to complete by the end of October. Paradino had 715 paying subscribers at the quarter’s end, up 47.7% from June, while Netwealth said it would invest a further $10 million over two years to accelerate product development and adviser growth.

That expansion comes with a near-term earnings cost. Paradino is expected to contribute an EBITDA loss of approximately $3 million in FY27, with its financial performance and the additional investment to be reported separately from Netwealth’s underlying results. The transaction follows the $39 million Paradino deal, which included upfront consideration, potential earn-outs and the planned follow-on investment.

Netwealth is also defending class action proceedings served during the quarter against two subsidiaries over investments in First Guardian. The release gives no estimate of potential financial exposure or outcome. That disclosure comes after the earlier First Guardian class action, which reported that the proceedings concerned First Guardian investment options and that the potential cost of the new action had not been disclosed.

Alongside the acquisition, Netwealth expects to invest about $17 million in capitalised software during FY27 and is targeting an EBITDA margin of approximately 47%, excluding the impact of First Guardian and its RISE plan. The company also said its virtual assistant Nova handled 29,500 conversations in the quarter, compared with 6,500 enquiries in the previous quarter, while its Research Hub and upgraded Managed Accounts architecture broaden the platform’s technology push.