Licensee switching prompts outflows at Praemium

Licensee switching by advisers has led Praemium to report $334 million in net outflows in the December quarter on its ultra-high net worth platform Powerwrap.

In its quarterly results for the three months to 31 December, the firm said total funds under administration (FUA) were $48.3 billion, up from $42.7 billion a year ago. 

This was divided between $22.9 billion on its platform and $25.3 billion on its non-custodial portfolio administration and reporting service.

It saw quarterly net outflows of $175 million, compared to a $206 million net inflow in the preceding quarter, with separately managed accounts (SMAs) seeing quarterly net inflows of $519 million but its specialist private wealth platform Powerwrap reported net outflows of $334 million. 

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Praemium acquired Powerwrap in September 2020 in an off-market conditional takeover.

FUA for the SMAs were $10.4 billion at the end of December while Powerwrap was $12.5 billion.
The outflows were “more than offset” by positive market movements of $819 million.

Praemium CEO, Anthony Wamsteker, said the reason for the outflows from Powerwrap was the movement of financial advisers to a licensee which was not using the platform. Praemium has experienced more than $500 million in gross outflows for this reason over the last six months. 

This is expected to continue at a similar rate for the next six to nine months, he said.

He said: “The December quarter witnessed a generally encouraging flows environment when compared to the first half of calendar 2023. The positive quarter for the Praemium scheme was, however, offset by non-systemic outflows from Powerwrap. 

“The Powerwrap scheme is specifically targeted to advisers with ultra-high net worth clients. Operating in this market segment can lead to greater volatility as flows can be impacted by relatively small numbers of client movements. 

“The December quarter’s $334 million net outflows reflects an abnormally large impact of a small number of key adviser exits who have moved from advice groups utilising the Powerwrap platform to non-Powerwrap licensees.

“Absent any further adviser movements, it is currently estimated that the rate of outflow from advisers who have transitioned to a non-Powerwrap license will continue at a similar rate for a further six to nine months.

“Whilst unfortunate, over the long term, Praemium and Powerwrap clients have typically grown their businesses at strong rates. This should ameliorate the negative impact of the transitions which might arise from known adviser exits.”