Hub24’s (ASX: HUB) first-half fiscal 2026 underlying net profit after tax increased 60% to $68 million. Both funds under administration and revenue lifted 26%, while underlying EBITDA grew 35%. FUA guidance for fiscal 2027 is upgraded to $160 billion-$170 billion, up around 6.5% at the midpoint.

Why it matters: Results were stronger than expected, mainly from higher platform revenue margins and lower cost growth. Usage-based and transactional fees exceeded our forecast, indicating strong appeal among advisors and warranting an increase in our longer-term earnings forecast.

  • Higher usage-based fees suggest greater adoption of its value-added services, reflecting Hub24’s strategy to strengthen its proposition and offset lower administration fee rates as FUA grows. Usage-based fees are more recurring than transactional fees, which are cyclical.
  • Regardless, we see current outsize earnings growth as unmaintainable. This is given stabilizing outflows among larger platforms and higher investment costs flagged by its peers, including Netwealth. Hub24 is trying to build a digital ecosystem, but this strategy is not unique.

The bottom line: We increase our fair value estimate for no-moat Hub24 by 7% to $48. This reflects both the time value of money and slower compression in overall platform revenue margins as usage of ancillary features increases. Still, shares remain materially overvalued.

  • The market likely expects rising flow growth and fee rates, driving outsize profit growth. Flow moderation, lower fee rates, and capped profit margins are more likely, given higher regulatory scrutiny following recent fund collapses and competitive pressures from other platforms.
  • To justify the share price, we’d need to lower the cost of capital to 4.0%, which is aggressive. If we maintain our 7.5% cost of capital, our EPS growth estimate needs to increase to 30% per year over the next five years (versus 18% in our base case. This is highly unlikely given the growing competition.

Shares of Hub24 are too hot to hold

At core, Hub24 is a provider of investment administration software as a service. This includes portfolio administration, investment management tools, and managed account services. The firm has a diversified offering, with administrative capabilities spanning custodial and noncustodial assets, self-managed super funds, trusts, and corporate compliance. Endeavors to add value include providing data analytics or features to facilitate dynamic advice strategies. It is also well integrated with external financial services and software providers. These efforts help Hub24 capture more touchpoints within the advice landscape and support its endeavors to streamline the implementation of financial advice to clients under a single Hub24 platform.

Hub24 has exploited the bureaucracy and lethargy of the small number of incumbent wealth management firms in Australia by developing a superior product and service. This has helped it rapidly grow FUA. The firm has benefited from the Future of Financial Advice reforms, which had protocols like bans on conflicted remunerations or duty for advisors to act in clients’ best interests. The 2018 Hayne Royal Commission was another material tailwind. These events led advisors to: 1) break away from incumbent wealth management businesses; and 2) seek new fee sources, including managed accounts, which were mainly available on independent platforms like Hub24.

We expect future competition among platforms to be more even, rather than skewed in favor of specialty firms like Hub24. We believe Hub24 will continue gaining share in the medium term, albeit slower than historically. It will benefit from the post-Royal Commission popularity of specialty platforms, but this trend will likely subside in time. Across the industry, all players, including incumbent firms, have evolved to comply with regulatory reforms and improve their own products.

Given that competing incumbent platforms also possess sizable scale and overall tight regulatory scrutiny, we don’t expect the firm to win a price war, nor can it charge a premium for its products. Fee compression and growth investments are likely to limit the degree of operating leverage that it can achieve.

Economic moat

Hub24 operates in a commoditized industry. There are many competing offerings with very similar features, while any improvements in its software functionality tend to be replicated by competitors. We don’t think Hub24 can compete on lower pricing over the long term, as it is relatively subscale to peers. We don’t expect Hub24 can develop pricing power either. Unlike typical software businesses that can charge more to an increasingly dependent customer base, Hub24 operates in a highly regulated industry that advocates for lower pricing to the end consumer.

While Hub24 has a diversified offering—custodial and noncustodial administration, technology and data services, and software—most appear to support the growth of its custodial Hub24 platform, its core product and largest (around 88%) earnings generator. This product has a swathe of competitors, including specialty platforms like Netwealth and Praemium, and major firms such as AMP, Insignia, and Macquarie. Its other offerings—like the Ord Minnett noncustodial administration service or Class self-managed super fund, or SMSF, software—also have minor shares in their own markets and are unlikely to have superior economies of scale or pricing power. Platform and tech solution providers like Hub24 largely compete on functionality, service, and price. However, they rarely have exclusivity with financial advisors, who, on average, use two or three platforms.

Certain tailwinds behind the growth of specialty platforms—like Hub24—are unlikely to last. While the specialty platforms did gain share by virtue of their superior functionality and service, they were also propelled by negative sentiment toward, and the move away from, incumbent wealth managers. This was catalyzed by the 2018 Hayne Royal Commission, which saw the incumbents losing noticeable share from subsequent reputational damage and regulatory reforms. Back then, incumbent platforms tended to be subpar in quality and costly. Regardless, there were advisors who exploited loopholes in existing compliance protocols and continued recommending them to clients.

Sentiment can reverse, and the laggards can catch up. The incumbents have since evolved to comply with industry reforms and improve their own products. While most remain in a period of transition, they are rapidly catching up on product features, and we’re not confident that Hub24 will still possess the technological edge over the next decade. Mergers and acquisitions, like IOOF buying MLC, have strengthened their economies of scale. It provides room for one to rationalize systems, reduce variable costs, and lower product fees to attract fund flows. AMP, who used to only sell its platforms via its advisor network, is now also distributing through non-AMP advisors.

Hub24 is unlikely to win a price war over the long term, given that competing institutional platforms also have sizable funds under administration and are rationalizing their platform cost bases. It has a 9% market share in the platforms space—and that’s after the post-Royal Commission popularity surge of specialty platforms (a tailwind that we expect to moderate). The incumbents, comprising AMP, Insignia, BT, Colonial First State, Mercer, and Macquarie, continue to make up around two-thirds of the market. Based on published rates, these incumbents outmatch Hub24 on pricing on several tiers (breadth of a platform’s offering) and price points (a client’s investable amount). Similarly, its managed account, noncustodial, and self-managed super fund, or SMSF, administration products have about 18%, 9%, and 31% share in their respective markets.

We also don’t see maintainable switching costs. For context, Hub24 endeavors to cross-sell its diverse product set and integrate itself into advisor work processes, so as to create friction if advisors and their clients wanted to switch away (as switching may bring operational risks). This is a common method that software businesses use to build switching costs—most would subsequently charge customers higher fees as they become more dependent. The proposition is that Hub24 can extend its administration capabilities across asset classes and vehicles, provide further value-add (such as data analytics or tax optimization) to facilitate the implementation of broader-based and more dynamic strategies, and streamline the implementation of financial advice to clients under a single platform.

But we don’t think this approach can help Hub24 build a moat. First, this “ecosystem-building” strategy is not only adopted by Hub24, as Netwealth—which has around 9% share in the platforms market—is also going the same route. Second, some offerings may not be as mission-critical as the core Hub24 custodial platform, and thus may not be used (and valued by users) anyway. Consider the Class SMSF software. Per Adviser Ratings, an average advisor has fewer than 90 clients. And per the SMSF Adviser & Accountant Report, non-SMSF advisors and SMSF generalists (1-20 SMSF clients) account for 74% of all advisors. This suggests the majority of advised clients don’t have an SMSF, though most would very likely have a custodial platform. Or consider the Ord Minnett noncustodial administration service, which serves a market that’s just 17% ($171 billion) of the investment platform market (AUD 993 billion)—again indicating not all clients have use of this service.

Third and more importantly, there is no single value proposition that can satisfy all parties, given varying client circumstances and advisor needs. Clients and advisors value additional factors like low fees or access to bespoke products/services, and not just the convenience of having an “all-in-one” product (that might not be in the client’s best interests). This is why financial advisors, on average, use two or three different platforms. We note AMP and Insignia have continuously lowered fees and improved the features of their platforms, which helped alleviate their rate of redemptions and assisted new business wins.

In addition, the administrative switching barrier may fall further as platform technology improves. For example, platforms are increasingly bearing the cost of transferring funds to their platform in order to attract FUA. Most allow in-specie transfers, which is the process of transferring assets between entities without having to sell them down. Historically, switching platforms requires selling and repurchasing investments, which creates taxation issues or having to crystallize gains/losses.

We don’t think Hub24 can build up pricing power, either. Regulatory constraints will continue driving fee compression. Note the “best interest duty” obligations require advisors to recommend products that are in clients’ best interests. Price is often the main basis of recommendation, unless an advisor can justify a more expensive product that has better features. But any improvements in platform features tend to be replicated, resulting in competing offerings all having similar functionality. Product discounting is fairly common, suggesting that price competition will likely persist. Indeed, all platform businesses, including Hub24, have reported declines in aggregate fee rates in recent years. It is also arguable that the platforms’ revenue model of charging fees based on funds under administration is not durable, considering the platform costs are not linked to FUA.

Hub24 generates very high return on invested capital, but this reflects the capital-light and service-focused nature of the business model. For example, as of Dec. 30, 2025, total assets were valued at just $687 million. Similarly, the book value of equity was just $546 million. This means ROIC is almost always likely to significantly exceed the weighted average cost of capital, or WACC, but also means the metric has little use as an indication of a moat.

Hub24’s environmental, social, and governance risk primarily relates to data privacy and security issues. However, we believe this risk is low, and we do not believe Hub24’s prospects for an economic moat are undermined by potential material shareholder value destruction from ESG risk.

Terms used in this article

Star Rating: Our one- to five-star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, and several other factors. A five-star rating means our analysts think the current market price likely represents an excessively pessimistic outlook and that beyond fair risk-adjusted returns are likely over a long timeframe. A one-star rating means our analysts think the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss.

Fair Value: Morningstar’s Fair Value estimate results from a detailed projection of a company’s future cash flows, resulting from our analysts’ independent primary research. Price To Fair Value measures the current market price against estimated Fair Value. If a company’s stock trades at $100 and our analysts believe it is worth $200, the price to fair value ratio would be 0.5. A Price to Fair Value over 1 suggests the share is overvalued.

Moat Rating:An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years.