Netwealth (ASX: NWL) $15.42

Netwealth (NWL) was hit 8% yesterday after downgrading its FY27 net inflow guidance from $18–20bn to $17–19bn, a reduction of around 5%, despite reporting record Funds Under Administration (FUA) of $139.2bn. More concerning was the quarterly net inflow figure of ~$2.6bn, well below consensus of ~$3.5bn, suggesting the slowdown in momentum is more pronounced than the modest guidance downgrade implies. HUB24 (HUB) was also caught in the selling, which is understandable as the NWL news reduces growth expectations across the broader sector.

We discussed our concerns around HUB’s slowing fund flows here, questioning whether the softer flows in the second half of FY26 were simply cyclical, as management suggested, or indicative of a more sustained slowdown. Yesterday’s downgrade from NWL lends weight to the latter argument.

The issue isn’t that these businesses have stopped growing; both continue to attract significant new money, benefiting from the structural shift towards independent financial advice. However, when investors are paying elevated earnings multiples for sustained double-digit growth, even a modest slowdown can prompt a meaningful valuation reset. Lower growth generally means a lower multiple, all else equal.

• We don’t own NWL, but we do hold HUB, which remains our preferred exposure to the sector. However, we’ve been cautious on HUB’s valuation and the slowing velocity of fund flows, and yesterday’s reaction reinforces those concerns. Both stocks being sold off is understandable, with HUB facing the music next Tuesday, releasing their quarterly fund flows. We’ll await that number.