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Praemium (ASX:PPS) shares on watch as FUA reached $49 billion

Wealth platform Praemium Ltd (ASX: PPS) announced today it has ended 2021 with $49 billion in funds under administration (FUA) after another strong quarter of growth.

Currently, the Praemium share price is up 1.89% to $1.34.

FUA reaches $49 billion

Key results for the second quarter ending December 31 include:

  • Quarterly net inflows of $1.25 billion, including $690 million into separately managed accounts (SMAs)
  • Annual inflows of $4.9 billion over 2021, an 87% improvement on 2020
  • FUA of $49.0 billion, a 43% increase year-on-year (YoY)

December net inflows increased 12% on the same quarter last year. It ranks only behind the most recent September result for record quarterly inflows.

All divisions – Praemium SMA, Powerwrap and Virtual Managed Account as a Service (VMaaS) – increased FUA over the quarter.

“We continue to see a sold pipeline of opportunities to support future growth and to deliver on our strategy to become one of Australia’s largest independent specialist platform providers”

Of the $1.25 billion net inflows, $925 million related to Australia and $311 million for the International segment.

Praemium recently announced it has sold its International division to Morningstar.

Praemium (ASX:PPS) sells international division to Morningstar for $65 million

At the International Adviser 2021 Global Financial Services Awards Praemium won Best International Platform for the fourth year running in addition to Best Digital Proposition. 

API growth accelerates

Praemium released several features over the quarter including new data feeds, efficiency and security improvements.

Notably, the business noted “continued growth in the number of external fintech providers using global API service”.

APIs (application programming interfaces) allows external developers to build features and software on top of Praemium, increasing the stickiness of the core wealth platform.

My take

Praemium recorded a total of $2.56 billion in inflows to its platforms. But after taking away outflows it achieved just $1.25 billion in net inflows for the quarter. 

Put another way, approximately for every $2 Praemium receives, it loses $1.

This is somewhat concerning. It suggests the business can attract new funds but is unable to retain client money over time.

For comparison, in its September result competitor Hub24 Ltd (ASX: HUB) received inflows of $4.31 billion and net inflows of $3.03 billion.

In summary, Hubs retains clients money better than Praemium.

The other major competitor Netwealth Group Ltd (ASX: NWL) did not disclose this data, but it’s something to keep in mind when evaluating the prospects of the three digital platform disruptors.

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