The Netwealth Group Ltd (ASX: NWL) share price is under pressure on Thursday.
In morning trade, the investment platform provider's shares are down 7% to $13.75.
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Why is the Netwealth share price falling?
As well as being caught up in a broad market selloff, the Netwealth share price is falling today after the market responded poorly to the company's quarterly update.
According to the release, the company's solid growth continued during the three months ended 30 September, with funds under administration (FUA) increasing by $1.7 billion to $72 billion. This reflects FUA net inflows of $2.1 billion and a negative market movement of $0.4 billion.
On a year-on-year basis, the company's FUA increased by 23.9% or $13.9 billion. This was supported by record 12-month FUA inflows of $18.8 billion, which management believes highlights its strong underlying inflows and new client wins.
The item that seems to be causing a bit of concern today is its custodial FUA inflows. While they came in at $4.7 billion for the September quarter, they were partially offset by higher-than-expected client partial withdrawals ($2.7 billion) from high net worth (HNW) and ultra-high net worth (UHNW) accounts.
This was caused by financial market conditions and resulting off-platform investments in term deposits. Management notes that a number of initiatives have recently been implemented to retain more of these assets on its platform.
Also growing during the quarter were Netwealth's funds under management (FUM), which increased $0.5 billion to $16.5 billion, and its managed account balance, which lifted $0.6 billion to $14.2 billion.
Outlook
Management acknowledges that trading conditions are challenging, but it remains positive on its outlook. It said:
Whilst the current macro-economic and interest rate environment creates some short term challenges and, as outlined above, has led to a period of elevated outflows we believe this is cyclical in nature and maintain our very positive outlook.
It has also extended its term deposit menu and will shortly make it possible for advisers to exclude term deposits, cash and annuities from their fees to support client returns. A number of other initiatives are also being put in place in an effort to reduce outflows.
However, judging by the Netwealth share price performance today, it seems that some investors are waiting to see proof that these initiatives are working before they'll buy shares again.
