Highlights

• FY26 funds under administration reached a record A$135.7 billion, up 20.3 per cent.

• Underlying NPAT rose 16.2 per cent to A$135.4 million, while statutory NPAT fell 47.9 per cent after First Guardian costs.

• First Guardian expenses totalled A$105.2 million, and two subsidiaries have been served with a class action.

• FY27 net flow guidance was trimmed to A$17 billion to A$19 billion, reflecting market Volatility and proposed tax changes.

For Netwealth Group (ASX:NWL), the answer lies in the gap between a growing core Business and the cost of the First Guardian failure, which has hit reported profit, triggered a class action and coincided with a trimmed flow forecast.

Investors are weighing record operating metrics against legal, regulatory and reputational issues that have not fully played out.

What Netwealth does and how it earns money

Netwealth operates an Investment and Superannuation platform used mainly by financial advisers, stockbrokers and private Wealth firms to administer client portfolios. Revenue is largely linked to the value of Assets held on the platform, through administration fees, alongside income from managed accounts, cash and transactions.

That makes funds under administration (FUA) and net flows the key drivers. Rising markets lift fee income automatically, while net flows, meaning new money minus withdrawals, indicate whether the platform is winning business from advisers. Managed accounts, where advisers run model portfolios on the platform, are a growing source of funds under management (FUM).

FY26 results: two sets of numbers

For the year to 30 June 2026, reported on 26 August 2026, total income rose 20.6% to A$391.1 million, with platform revenue up 21.0% to A$382.9 million. FUA reached a record A$135.7 billion, up 20.3%, helped by net flows of about A$15.4 billion, which were 2.0% lower than in FY25. Client accounts grew 12.4% to 182,276, and the company reported Market Share of 9.7%.

Excluding First Guardian expenses, the company reported EBITDA up 18.0% to A$192.9 million, a Margin of 49.1%, and net profit after tax (NPAT) up 16.2% to A$135.4 million. Underlying Earnings Per Share rose 16.0% to 55.2 cents.

Statutory figures tell a different story. Reported NPAT fell 47.9% to A$60.6 million, and statutory earnings per share was 24.7 cents. The difference reflects A$105.2 million of First Guardian expenses: A$100.7 million of compensation and settlement costs plus A$4.5 million in legal and consulting fees.

Despite this, the board lifted full-year fully franked dividends 9.1% to 42.0 cents per share, including a 21.0 cent final dividend paid on 29 September 2026.

The First Guardian legacy

First Guardian was an investment option available through the Netwealth Superannuation Master Fund that later collapsed. According to the FY26 results, Netwealth agreed with the Australian Securities and Investments Commission in December 2025 to compensate affected members, and payments were processed in January 2026 to restore members to the value of their net Capital invested. It also entered an enforceable undertaking with the Australian Prudential Regulation Authority and launched Program RISE to strengthen investment governance.

The matter has not closed. On 25 September 2026, Netwealth disclosed that two subsidiaries had been served with a class action concerning certain First Guardian investment options. The company said it intends to defend the claim, that the matters had previously been addressed with ASIC and compensation paid, and that the claim does not relate to current platform features or operations.

Record quarter, softer guidance

The first-quarter FY27 update, released on 15 October 2026, showed FUA at a record A$139.2 billion, up 15.2% on a year earlier. Managed Account FUM rose 26.0% to A$32.4 billion, total FUM reached A$36.6 billion, and FUM net flows hit a record A$2.4 billion. The company added 3,822 net new accounts, bringing the total to 186,098.

FUA net flows were reported at A$3.6 billion after excluding A$0.4 billion of pension payments and A$0.6 billion of outflows from two institutional clients. Management cut FY27 net flow guidance to A$17 billion to A$19 billion, from A$18 billion to A$20 billion, citing market volatility, Interest Rate uncertainty and proposed legislative and tax changes whose final form and timing are unclear.

The update also covered Paradino, an AI-powered advice workflow tool Netwealth is acquiring. The company expects Paradino to make an EBITDA loss of about A$3 million in FY27, with a further A$10 million to be invested over two years.

Strategy and competitive position

Netwealth competes with Hub24 and with platforms run by larger institutions. Its stated "Dx30" ambition is to double FUA over the four years to FY30. Management has pointed to an expanded relationship with Morgan Stanley Wealth Management Australia, covering ASX-listed and domestic investments, and has estimated the stockbroking and private wealth segment at around A$600 billion of addressable opportunity. The number of financial intermediaries using the platform rose 5.9% to 4,205 in FY26 and stood at 4,226 at the end of September.

The investment case therefore rests on whether adviser relationships and managed account growth can offset reputational damage and higher governance costs.

Risks and what to watch

The main uncertainties are the class action's scope and outcome, further regulatory work under the APRA enforceable undertaking and Program RISE, and whether advisers move client money elsewhere. Platform revenue is also sensitive to market levels, so a sustained downturn would reduce fee income even without outflows.

Investors will likely watch delivery against the revised A$17 billion to A$19 billion flow range, the cost and integration of Paradino, progress on the Morgan Stanley channel, the next quarterly update and any developments in the class action. Netwealth's core platform is still growing; the question for the coming year is how much of that growth reaches statutory profit.