I would now like to hand the conference over to Mr. Matt Heine, CEO and Managing Director. Please go ahead.
Thanks, Jamie, and good morning, everyone. Managing Director of Netwealth, and I'm joined here today with our CFO, Hayden Stockdale. Thank you for joining, as mentioned. Today, we are very pleased to present our half year results for 2026. And in many ways, the last 6-12 months has been a tale of two cities. Or as Charles Dickens famously said, "It was the best of times, and it was the worst of times." On the one hand, we delivered record results, which I'll walk through shortly, and on the other hand, as many of you would be aware, we worked through a very challenging regulatory environment.
We're particularly pleased to be able to settle that particular issue at the end of last year and give the members and victims of the First Guardian collapse clarity going into Christmas, and also to reach agreement with the regulators to start this year with a fresh start. For the purpose of today, tools and the adjusted financials. So the numbers that we'll work through in a moment's time have all been adjusted to remove any impact of First Guardian. So that is the compensation payment and any one-off direct payments related to that. Please note that that is the only adjustment to these numbers, and otherwise, they are as we have delivered. Turning to page 7, as you can see, we delivered incredibly strong metrics across FUA, net flows, income, and EBITDA.
and we've also started off this year very strongly with FUA currently sitting as of the sixteenth of February at AUD 127.3 billion, and net flows year to date, calendar year to date, of AUD 1.6 billion. So good momentum coming into the year. The last six months to the end of calendar year was a record from an inflow perspective, with AUD 16.6 billion received, resulting in net flows of AUD 8.2 billion. Our FUA for that period increased 23.6% to PCP. Our total income of AUD 193.8 million was a 24.7% increase to PCP.
AUD 7 million was a 23.9% increase to PCP, and our EBITDA margin of 49.9% was marginally lower than the prior corresponding. We took operational efficiencies and reinvested them back into our technology and product, and I'll, I'll go through that in a little bit more detail in a few slides time. Importantly, though, on slide 8, you can see as per previous results, we have got a strong track record in delivering consistent growth and also operational leverage across the business. In the first half 26, as mentioned, we saw FUA growth of 23.6%, which resulted in income growth of 24.7%. The EBITDA, as I touched on, of 49.9 and EBITDA growth of 23.9.
So really pleased with that set of metrics, and the growth in the business. Also, particularly pleasing, which we'll you see on slide 9, is that a lot of the investment that we've been talking about, and have indicated, in previous result sessions, is actually now starting to result in real growth, across a number of really key ancillary areas. The managed account, which is a key driver of, of growth and a, and a real, engine room of the business, saw fantastic growth, during the period of 32.3%, and even the managed accounts, as they continue to scale rapidly and are the chosen, method of implementation for many financial advisors across the country, was an important focus for us over the last eighteen to, eighteen months or so.
During that period, we completely rebuilt our managed account infrastructure, which gives us excellent scalability moving forward, as well as a range of new capabilities and features that we know are requested and needed in the marketplace. So a really good place to continue to grow that part of the business and to make sure that we grow that in the broader context of the platform. Equally, we've been investing heavily into our FX and trading capabilities, and that's across both domestic and also international. FX is an important revenue driver, and we've seen very big uptake of international trading over the last 12-18 months.
You can see there the volumes continue to grow with a 40.8% increase on the international volume, all contributing to a very diversified and growing income base. Equally, as a result of further investment into our cash fund functionality, we've seen our cash balances increase to 6.2%, which was a significant step up from this time last year. Some of the new features included additional payment facilities and the ability to set regular payments. So increasingly, the cash account capability and functionality is aligned to what you would expect from an everyday bank account. On page ten, equally important is that throughout the course of the year, we've added a significant number of new advisors.
So for the 12 months to the end of the period, we saw a 7.3% increase from and across all of our advisors, so the 4,089 advisors, a significant jump in the number of accounts added of 13.7%, 172,200. As per previous results, you can see the trend is very consistent, where the bulk of our business throughout the course of the year, each year, actually comes from existing customers or those that have come in over the last three years.
Throughout calendar year 25, 91.7% of inflows were from existing customers or those who newly joined the platform, with 8.3% coming from those that have joined in the course of the twelve months. Those that have joined recently in the last twelve months will be really hit strides and start to contribute meaningfully to flows in the next year and years beyond. So very strong thematics, the drivers that really do underpin not only our FUA growth, but also the ancillary growth on the platform. From a strategy and product perspective, clearly, there's a lot of focus at the moment, emotion, and potentially noise around the potential impacts of AI. So I will spend a little bit of time on.
It's also really important, I think, to understand, and many of you would have seen before, that the changes or the acceleration of AI in the last 6, 12, 18 months hasn't fundamentally changed our strategy. The business is a technology-first company. We've been adopting and implementing AI across the business for many years, and the current advancements, particularly, which anyways actually underpin and further support what we believe is a very exciting future. Netwealth, particularly, having been across this trend and investing into these areas now for some time, actually believes that we are uniquely positioned to drive advisor efficiency intelligence across our products and services that leverage data, technology, and connectivity, importantly, in a very heavily regulated market. And I'll delve into some of these themes a little bit more on the following slides.
It's also important to understand that Unify, which was a business that we bought a number of years ago, actually is a key advantage and provides a huge moat for our business as we continue to implement it and integrate it into every part of the platform. Through Unify and also the broader business, we have now the largest data set of any platform in Australia, and ultimately, those with the most data are best positioned to benefit and really leverage and win in the AI world. The ecosystem that we've built across the platform is incredibly powerful.
Not only we've, we've got proven, scalable, and market-leading technology, and financial products, but our insights, analytics, and also our partners and integrations put us in a great place to really leverage and take advantage, of what's going on. Moving to slide 13, and there's obviously a lot of text here. I don't propose to go through each and every item other than to say, we really do believe, that from an AI perspective and from a technology perspective, that we are in a very good position to deliver future solutions on today's data and infrastructure. But maybe the four top ones, in my mind is that AI actually amplifies advisors. The beauty of AI, and we're seeing this being adopted already across many of our customers from the advice process.
The more that advisors are amplified, the more that they're able to, deliver productivity across their teams, the more productive those advisors are. So if the advisors that are using us, as I mentioned, many are, are using AI increasingly in their practices, this means that they can see more clients, and therefore, Netwealth is a net benefactor from that. Our scale also turns AI into a moat. As I touched on before, we have one of the biggest data sets, in the industry, and there is a lot that we can do with that data to really start delivering, incredible intelligence and insights across the business, as well as to drive significant advisor efficiency. And in many ways, our scale actually turns AI into a moat moving forward.
The bigger we get, the larger our data set, the more that we invest into AI, the bigger our moat. It would also be remiss not to mention that Netwealth and our peers operate in a heavily regulated market, and we've seen the impacts of that in recent times and across Australia, whether that's ASIC, APRA, AUSTRAC, ATO. And it's important that platforms continue to be a key gatekeeper in the industry. As one of the analysts, I think it was Lat very clearly stated, APRA is not handing out licenses to five coders, and I think that's really important. The regulatory environment that we operate in also provides a huge moat, and we see it as a benefit moving forward.
We need to make sure that we comply with very sophisticated laws and requirements, and that is not easy to replicate. We also think that AI really raises the barriers to entry. It's difficult for new players to come in and do what Netwealth does. It's not that challenging to build a robo-advisor if we're talking about an automatic tool that rebalances a client's portfolio. What is difficult is to put that on top of the infrastructure and the client relationships that we have built out over many, many years. So as we continue to adopt and embed AI across everything, we get to get huge internal efficiencies, and we're starting to see really good outcomes in that regard already.
But we believe it allows us to also provide very strong customer service propositions as well, which makes our clients more efficient, which enables them to see more customers, which allows them to put new accounts onto the platform. No doubt, we'll spend more time chatting about this over the next couple of days, but that is a good list, and clearly there's more to come. But again, without overemphasizing it too much, there's a huge net benefit to our business, and we're excited about the future that it can deliver. Moving on to slide 14, just quickly, our products and services. So this is the very heavily regulated aspect of our business. We continue to deliver very tailored solutions to our key market segments.
To win in the affluent advice segment, and that our range of accelerated products, both the Wealth and Super Accelerator, continue to be enhanced and evolved to meet the needs of affluent advisors. We're also really excited to be launching our new high net worth and ultra-high net worth products into the market with the launch of Netwealth Private, and also the pending release of our new individual HIN service, to which we're already starting to onboard customers in a soft launch phase. So over the last six months, they're listed on slide 15. But you can see there, as indicated, we have been investing heavily across the board. But more importantly, we are delivering real value to our customers, both from an efficiency perspective, but also from a new product and access perspective.
On slide 16, again, great growth across all of our core segments. I touched on the fact before that we're focused on the affluent advice and high net worth advice parts of the market, and you can see that that is really nicely split across the inflows and the makeup of the platform. Great growth across all of those segments, and our newer products that have been released directly for the affluent and also high net worth, being our accelerated core product, and on non-custodial, are seeing great adoption across the country and through our advisor base. Looking forward, it is very much more of the same. However, I did just want to talk about the growing and expanding opportunity in our target markets. Clearly, we continue to grow and expand within our platform sector.
The system growth of that continues to grow, and Netwealth is taking share from incumbents. Last year, for the 12 months to September, we had inflows of AUD 15.5, which put us in second spot, and we increased our market share by 1%. We believe that there is still a huge opportunity to continue to grow the business and the platform within our direct market, but we also recognize and understand that there are huge opportunities outside of it. On slide 18, you may have seen this recently. There's a lot of commentary in the press just around the change in competitive net flows or inflows across retail and industry funds.
We've been talking to this trend now for, for some time, and it's becoming increasingly apparent that this trend is only going to accelerate, as we move forward. Three is not only very significant, but it is growing rapidly. And in 2030, the numbers would suggest that we move from the fifth largest pension pool in, in the world to the second, with over AUD 6 trillion in the system, up 50% from today over the next four years.
As the demographics get older, and again, a trend that we've been seeing for some years, we're seeing more and more Australians with complex advice needs that are looking for advice outside of their super, whether that's investment, estate planning, or other aspects, seeking advice, at which point they're looking for a holistic offering that covers both super and non-super capabilities. This is the opportunity for the retail sector, and this is the opportunity for Netwealth, and this is what is driving significant flows from industry funds across into Netwealth, and some of our peers. Again, huge opportunity, and we think that on slide 19, now we are moving into a more greenfield, oil space, continues to be largely untapped.
We're really pleased to be bringing our new product or our individual HIN offering into the market in the next month and are already soft launching with a number of key groups and clients who have been collaborating on the design of the product with us. We believe this is a very significant market of around AUD 600 billion which is spread across 55 brokers that are of meaningful size and scale. As a quick recap, this really leverages the best of Netwealth.
That is everything that we offer from the retail platform, but also provides brokers the ability to add in their individual HIN offerings through the partnership that we have with FinClear, where they'll be able to trade individual HIN directly off the arm and settle back to Netwealth, or hold it in their own HIN registry. It's a very flexible solution that really has been designed and built to offer optionality for the clients that we're working with. It really solves a problem for many of these firms as they look to adjust or change their business models from a transactional broking model to a true holistic private wealth offering.
And means that advisors and the brokers can scale up and down their offering, depending on the sophistication of their customers, either to provide better reporting, online access, and mobile access, on their HIN-only portfolios, all the way through to very sophisticated accounts that are looking for international exposure, FX accounts, bonds, and private markets. So we'll have more to say on this, but fair to say that between the current opportunities within the direct platform market, the shift from industry funds to retail, and the private wealth, we've got plenty of opportunity ahead, products, technology, and obviously AI, to, to leverage, the opportunities that we see in front of us. In regards to the response, I would believe everyone would be well and truly aware, of what's transpired.
I don't necessarily want to dwell on the past other than to say, as I did at the start, that we're incredibly pleased that we're able to compensate our members and look after our members, and also, start to look forward. From a response perspective, there is considerable. Again, we see this as a benefit. There is no doubt that the bar has been raised across the industry. This applies to all platforms and not just Netwealth.
We are very progressed in changing our ways of working to ensure that we can make sure that any investment options that go onto the platform not only meet members' best financial interest, but we've got appropriate onboarding and monitoring in place to avoid any further issues such as those that happened in both the Shield and First Guardian. We're working very collaboratively with the independent expert and we believe, again, moving forward, that this puts us in a fantastic position to really deeply embed these new ways of working into what we're doing and meet any potential regulatory requirement in the future. So on that note, I'm gonna hand over to Hayden Stockdale, our CFO, to provide a little bit more color and information on the financials.
Over to you, Hayden.
Wonderful. Thanks, Matt. And welcome everyone to the financials part of our results presentation today. And I want to acknowledge up front, as Matt did too, that this has been both a strong half from an operational and financial perspective, but also a period where we've talked important for impacted members, and that's clearly had an impact on our results, too. So as Matt said, all numbers we're presenting here are and so associated with First Guardian being excluded. Okay, well, let's get straight into those numbers, on slide 24. I think the headline story for this half is that our broad-based momentum continues to just roll on across every part of the business. We delivered almost 11% growth in custodial FUA inflows, which were AUD 16.4 billion, a record half year.
Total FUA grew 24% to AUD 125.6 billion, and that growth pushed our market share 2%, which is up 100 basis points. In turn, that FUA growth translated into total income of AUD 190 million, and EBITDA as well of AUD 96.7 million, up 24%. Importantly, it's a bit of a recap of what Matt had said earlier, too. We added over 20,000 accounts in a 12-month period for the first time ever. So that takes us to over 172,000, which is up almost 14%. And our advisor network grew 7.3% to over 4,000 for the first time.
Now, that ratio of accounts expanding faster than advisors is actually quite an interesting one, proving that we're delivering strong productivity improvements to our customers, with each advisor now, on average, managing 6% more accounts than a year ago. On the next slide, we can see that our platform revenue hit AUD 189 million, up 25.3% year-on-year. But what I want to draw your attention to here, as I said earlier, is the continued broadening of our revenue base. Transaction income now represents 13.7% of platform revenue. Management fees were up 30% to 6.3% of the mix. Ancillary fees grew 36.5% to represent 41.2% of the total, and admin fee just under 39% of the total.
The key message here, obviously, is that our revenues continue to be highly recurring, more diversified, and expanding across customer segments, products, and revenue sources, and that's exactly where we want to be. Turning now to slide 26. On this slide, we see the effects of both price and volume growth on our financials. So from a volume perspective, what we saw a couple of slides ago is that we're getting more accounts per advisor. So we're getting driving growth for us, generating productivity in our account numbers. But for each account, we're also getting more FUA, which has grown by 13.6% to AUD 720,000, as you can see on the left-hand chart there. What's really interesting here, though, is that this FUA per account is all coming from existing accounts.
So the new accounts we've been adding are, on average, at lower FUA balances. Now, this is great, as we'd expect those new accounts to grow over time, but it also means that our existing accounts are sitting at balances that are higher than what we are showing here. Now, overlaid on this is, here we managed to contain pricing compression to 0.3 of a basis point on our revenue margins, so 31.1 basis points versus 31.4 a year ago. And there are two items worth noting here. First, the increase in our cash margins from 1.35% to 1.5% back in April last year. That added 1.3 basis points to our current revenue margin compared to the 0.9 of a basis point you'll see in the chart there.
And then secondly, and I think this is very, very important, the 1.1 basis point contraction in our admin fees was virtually entirely due to market movement and the impact of pricing tiers and gaps. So virtually none of it was due to pricing pressure. And the net impact of all of this, you can see on the right-hand side, and that's the ultimate key performance metric here of revenue per account, which expanded 10.3% from a year ago. We now turn to slide 27. Here we're reporting today, operating expenses of AUD 97.1 million for the half, up 19.7%, and that was done on over AUD 38 million of higher revenue.
So as the business continued to scale during the half, we made a very deliberate choice to reinvest operating leverage back into the business, which we've been actively communicating to the market about. And I want to be very clear on this: These costs, these additional costs, are good costs, not bad ones. They're strategic decisions to drive future growth. So specifically, we made investments in all areas of the business as we calibrate to scale. From an operating leverage perspective, on a net basis, we yielded about 10 basis points in efficiencies from each of our G&A as 20 basis points total. And from an investment perspective, we added 20 basis points to our delivery activities as we added capability to support the rollout of our broker opportunity, as well as other process improvements.
And just to put that in a little bit of context, 20 basis, we're talking massively large numbers here. And then we also invested 30 basis points in product and tech on a range of items that, that Matt touched on. But just to reiterate here, our operating leverage is real, it hasn't changed, and it's being generated by strong revenue growth. We're just choosing to reinvest it to support that future growth, and that's a strategic decision, and we're very privileged to be in a position to do that. The net impact on the next slide, slide 28, with EBITDA up 24% to almost AUD 97 million, as I've said earlier, and an EBITDA margin sitting at almost 49%, sorry, almost 50%.
I do need to point out, though, that we did record one and a half million dollars in extraordinary income during the half. And if you adjust for this, our EBITDA margin was 49.5%, and that's. We're also converting, as you'll see here, virtually every dollar of EBITDA to cash, which is a quality hallmark we're very proud of. And this means we can deliver strong returns to our shareholders, as you'll see on slide 29. In line with our P&L, EPS is up 22.2%, and today the board declared an interim dividend that's 20% higher than a year ago, at 21 cents per share. And that's a 75% payout ratio.
Finally, I'm told that we have the second highest Rule of Forty in the ASX 200, at 74.6%, which is a strong testament to both our growth and our margins. Briefly on slide 30, we hired just over 80 employees in the half, with that investment following the, although we did actually make some additional investment in sales and marketing late in the half, which hasn't actually shown through the P&L yet. Okay, thank you. I won't go through slides 31, 32, or 33, but I will close out on slide 34. So just bringing it all together, we're scaling, diversifying, investing, and earning. We've got strong momentum and growth of approximately 25% across all key metrics, which we're driving ourselves through productivity initiatives with advisors and assisted by long-term structural tailwinds.
Our revenue is growing through strong FUA expansion from existing accounts, but we're also adding newer accounts at lower balances, which we know will grow over time. We've proven our operating leverage over many years now and have delivered that again this half, with deliberate and well-flagged investments in growth. We convert virtually every dollar of EBITDA to cash and have increased our dividend despite some of the other challenges we faced during the period. And all up, we score extremely highly on that balanced scorecard of growth and margins, which is the Rule of 40 metric. So on that note, I'll pause and hand back to Matt.
Thanks, Hayden. Getting to the end of the presentation, I'll just reiterate all of Hayden's key comments. And also, as a result, we reiterate our guidance for FY 2026. That is that our FUA net flows are not gonna differ materially from FY 2025, but we expect our EBITDA margin, excluding First Guardian expenses, to be approximately 49%, is gonna be approximately AUD 12 million, and our FY 2026 final dividend to be based on the FY 2026 earnings, excluding First Guardian expenses. With that, thank you for taking the time to listen, and we will open up to questions.
Thank you. If you wish to ask a question, please press star and then one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star and two. If you are on a speakerphone, we do ask that you please pick up the handset to ask your questions. Our first question comes from Elizabeth Miliatis from Macquarie. Please go ahead with your question.
Good morning, and thank you for taking my questions. Apologies if you've mentioned this on the call, but just stressing a few results, actually. Just firstly on the margin outlook and CapEx as well, you know, any comments there on just the medium-term outlook there, and particularly on the CapEx side? I think you made it fairly clear on the margin, but just on CapEx, that, you know, restated number for 2026, is that sort of the status quo going forward?
Hi, Elizabeth. Look, it's very difficult to give you any guidance beyond what we've actually publicly stated and in writing. So, yeah, 49% is the margin that we expect for FY 2026. We're yet to go through the budgeting process for FY 2027. So, you know, watch this space, but we will communicate that to the market at the appropriate time. But I would like to say just to reiterate two things. One is, we do have very strong operating leverage margin should be edging up over time, but equally, we have extremely significant growth opportunities that we are very keen to invest in. And so it's really just about getting the right balance there.
We have a very active conversation with, I think, investors in the market around this, so we're very grateful for the feedback that we get on this. That feedback to date has been extremely supportive of the stance that we've taken.
Okay, got it. And then just on flows, obviously, you've given us the quarter to date number. It does look weak, but obviously, you know, is it sort of tracking in line? Obviously, you've reiterated the full year number, but just sort of any comments around seasonality, and is it tracking in line with where you would typically expect it to be, given January is a bit weaker?
Yeah. There is a lot of seasonality in these numbers being Christmas and New Year. You can take that as a given. And likewise, the early parts of January through to Australia Day are typically fairly soft. So,
T-tracking-
Yeah.
Tracking in line and slightly ahead, I believe, of last year.
Yeah.
Okay, fantastic. Thank you.
Well, that would not be right.
Thanks.
Our next question comes from Siraj Ahmed from Citi. Please go ahead with your question.
Morning, Matt, Hayden. I have three questions. Just, Hayden, just on the cost, right? It seems like you're investing an incremental AUD 14 million this year. Can you just confirm that? And just on that, I mean, that's. I think at the start of the year, you had said sort of AUD 13 million. There's a AUD 10 million uplift here, right? Just trying to understand where this investment is going. Is this really compliance regulatory driven, or how should we think about this? Thanks.
Yeah. Hi, hi, Siraj. The way we think about cost, so as our revenue grows, our costs will naturally grow. There is a very much a variable component to that. And, you know, we have actually achieved, I think, higher revenues in the half than we were expecting, and as a result, we have higher costs associated with that. I think you would have seen the guidance we gave for FY 2026. If you roll back the clock six months or so ago, we gave a sort of some breadcrumbs to lead you to sort of, you know, a margin outcome, but we've actually given a very specific sort of cost number. And I think the reality is, you know, we do look at margins instead of costs.
So the actual dollar costs have tracked well with what our expectations are. Part of it is to do with the fact that revenue is higher, and part of it's to do with what we've well flagged, and that is the additional investment that we've very deliberately made in the half.
I might just add to that. So, yeah, clearly, because revenue was ahead of expected, we did bring forward or accelerate some of the investment into the initiatives which we've talked about and which are certainly converting and generating good opportunities. In relation to your comment about, is that the cost of regulatory? No. So the headcount that we expect to add as a result of any regulatory response is captured in our normal headcount growth. So certainly wouldn't draw a line or any parallels between the two.
Got it. Thanks. Second one, the broker or the individual HIN opportunity. Matt, you're saying you talk about a large opportunity here, right? Are these clients related to the large brokers? And secondly, in terms of the split between, one of the key questions is the revenue profile here, the split between individual HIN versus custody, like, how should we think about that? Is that like 20, 80, or is it 50/50?
Yes, well, I won't specifically talk to the customers at this stage, but fair to say, as per the pack, we are starting to onboard clients from groups that have come on board as a result of the new offering. The key to the IHIN offering is that it really unlocks the market. Without that particular feature or capability, it's not fit for purpose when speaking to this new segment. So that, that's the first part. The second part is that the platform margins will be the same. So as these private wealth firms and broking firms look to adopt and utilize all of our capability, the margins on the platform will be the same as they were for any other segment.
The incremental cost to the broker, or the IHIN, we're still working through, and there'll be sort of variable pricing based on scale, but it might be between sort of AUD 300-AUD 800 per account. So it's incremental, but covers costs and, more importantly, unlocks this part of the market.
Sorry, Matt, but larger chunk, or is it really the IHIN part, which is the large chunk here? Because they're already on it.
So we would expect over time that whilst there's revenue from IHIN, it really is about unlocking and bringing the custody solutions to the broking and private wealth market. So it opens up far more streamlined international equities, bond trading, private markets, et cetera. So it's the whole package, and therefore, the margins that we would expect as we sort of grow into the segment, would be similar or improved upon what they normally would be.
Great. Last one, just quickly. Just on the flows, following up. I mean, it sounds like it's what, 5% up year-on-year, based on your disclosure last year. It's that I know it's pretty early in the quarter and it's seasonal, but it does seem like momentum could have slowed a bit versus the outturn, the growth in flows you saw in the second quarter. Anything to read into it, and especially given you have hired extra sales staff, should we expect better momentum for the rest of the year? Thanks.
I wouldn't, yeah, I wouldn't read any. It's the eighteenth of February. The year is only just getting started. The new team's been on board for getting close to a month. We've put guidance out there, and we've got confidence in hitting those numbers.
Yeah. Just, just bear in mind that, you know, it, it's a single data point. It's actually a very good data point. Despite that, I wouldn't read too much into it. 90% of our flows come from long-standing existing customers. So there's a growth engine that just sits there. But look, momentum is, is-
very good at the moment.
Cool. Yeah. All right, thanks.
Our next question comes from Nick McGarrigal from Barrenjoey. Please go ahead with your question.
Thanks for taking questions. Just a couple of questions around flows and potentially where you're seeing, you know, optionality and further growth this year. I understand that there's a large competitor that you've hired a number of distribution people from, and we've obviously seen some good data points out of retail, super winning share of industry super, but just how you think about those two opportunities?
Yeah, I think, as per sort of brief discussion, we believe that the PAM or our addressable market is expanding by the day, incredibly lucrative from a new business perspective, both from an organic perspective, but also shifting share from some of the legacy and incumbent platforms. The industry fund dynamic is only gonna grow. The demographics are a huge tailwind. Australians are getting older, and over the next five to 10 years, you've got many millions of Australians looking to retire with complex advice needs that are seeking advice. So we would expect that trend to not only continue, but to accelerate, pretty exciting thematic. And the third one, as we've touched on, is the broking market.
Still in its infancy, but the pipeline is starting to look very attractive with a number of small, medium, and large opportunities underway.
Thanks. And then on the additional OpEx and the margin that you flagged, can you just talk about the medium-term expectations on what those reinvestments back into the team you think can deliver in terms of product and offering?
That's a pretty broad question. So the, the tech team's pretty sizable these days, and so they are working across a whole range of initiatives. Clearly, the broking, offer we've talked about, that'll be, sort of largely complete as far as the first phase, in the next month or two. There'll be follow-up work. We're also doing a lot of work, on our data and AI strategy, which we've touched on, and, we think that's pretty exciting from a, I guess, advisor intelligence and efficiency perspective, particularly as we start to build out that ecosystem and look at the various jobs that need to be done across an advice firm, and, also just broader, platform efficiency internally.
So we're starting to see really good benefits from a lot of the AI investments that we're making across the business, whether that's across our engineering. We're reducing headcount and replacing sort of quite manual workarounds as well as just within the contact center and broader administration. So there is investment across the business. We've tried to highlight some of the the recent wins, where we've made investments and how they're converting into return on investment and moving forward, we believe we'll continue to grow market share, but also to continue to grow those ancillaries.
All right, thanks.
Our next question comes from Tharan Jeyathasan from JP Morgan. Please go ahead with your question.
Tharan Jeyathasan , JP Morgan. Thanks very much for taking my questions. Actually, just the first question on revenue margin points or revenue margin compression, and I think earlier you provided some color, you know, with, you know, 1.1 basis points from fee caps and tiering being offset by 1.3 basis points from cash margins. Can you speak to perhaps some of the other drivers that you've seen and what you're expecting to be, such as FX, I think in trading and cash management, as examples? So yeah, how should we think about the impact of this into 2H?
Yeah, look, I think it's fairly straightforward, Tharan. You know, on the cash side, the margin we have is effectively fixed. It does move around a little bit at the edges, depending on, you know, some currencies and the like that we hold, but largely fixed. So the key driver there is really just percentage of FUA that's held in cash. And, you know, there's some seasonality around that, but there's a large degree of predictability to it as well. One point to note, though, is that as you get market movement, clearly the market doesn't move cash balances. So that does have sort of a softening effect there. The two smallest lines that we have are transactions and management fees, are largely stable.
There was a little bit of contraction in the transaction fee, half on half. You might recall a similar time last year when we had Liberation Day and a fair bit of volatility around that. We didn't get to repeat that effectively. But, but, you know, on the whole, fairly consistent, and we are sort of, you know, certainly trying to grow the management fee margin with our managed accounts, and we are doing that, but it's off sort of a relatively small base. And that leaves sort of the other one, which probably gets most focus, which is the admin fee. And that's why I was, I was very specific about giving the insights as to what the movement has been there.
It's all market movement within caps, which I think is a very pleasing thing to know. You know, we do see a little bit of pricing pressure in the market, you know, from time to time, account to account, but on the whole, it's got a negligible effect here.
Okay, now, so just to clarify, moving into 2H, in that case, the impact of the higher cash margin earn rate is now in the base. You know, the main impact you expect coming through into the 2H would just be that cap and tiering interaction with market. There's no other offset that we can think of.
Yeah, but look, what I'd encourage you to do is not just focus on the pricing component, but focus on the volume component. And the volume component is obviously very, very strong. And, you know, as Matt points out from time to time, too, I think, since the date of the IPO, our admin fees have contracted by 70%. But we've found a lot of alternative revenue sources to replace that. And, you know, the EBITDA margins are still sitting around 50%. So, you know, there are macro trends that we can't swim against the tide on, but despite that, there are macro trends which are giving us very, very significant tailwinds. And net-net, we're in a very, very strong position here.
We'll continue to look for revenue opportunities, of which we still believe there's a number.
Helpful. Perhaps just a second question around some of these initiatives to address, you know, the regulatory issues that you've had. You've announced there's reviews into investment options and things like that. What has the feedback been like from the regulator in your engagement so far? And how should we think about y ou know, I imagine there's going to be uplifts to platform governance and risk management and the like. How should we think about impacts on costs? 'Cause I think you previously mentioned amount, so should we expect no further cost growth from this issue specifically?
No, there will be cost growth across the business. And as I said, we are calibrating to scale. So that will be part of it. But the important thing to note, as Matt said, is that we will accommodate that cost growth within our planned headcount.
Okay, understand. In terms of feedback from the regulator, in the conversations you've had?
We're not gonna comment on that specifically. But yeah, certainly we've got a program, we've agreed to certain milestones, and we're working to those milestones. So, I think that the reality is that we are entering, as an industry, a new era, where there is much higher expectations across all platforms, not just Netwealth. And it's very clear now what the expectations are to ensure that we continue to keep the industry and the system safe. So, we will continue to work and uplift as per required. But again, it's part of our headcount, and it's part of how we do business.
Understand. Thank you. And maybe just a final question. I know there's been a few questions on flows already, but just wanted to get a little, or I just wanted to get your thoughts on this. You know, some of your or one of your accelerate. So just curious to what degree do you think these First Guardian issues may have impacted your flows, either in terms of, you know, reputational impacts or, you know, just in terms of a distraction to yourselves, in terms of running as hard on sales and engaging with advisors? And how should we think about, you know, flows? So, you know, are you more optimistic about your outlook over the next 6-12 months, say?
Yeah, look, you know, clearly, as we've talked about a number of times, I don't think anyone wanted to see what occurred, nor sort of had to work through it. It was really important that we worked very, as well as, ultimately come to the agreement to compensate clients, from a reputation perspective, and also to ensure that they had the security of their future going into Christmas. But ultimately, it was an issue that we were dealing with, and you can see from the numbers that the business has not suffered any issues from a momentum perspective. We continued to win considerable new customers and clients throughout that period.
Yes, there were points at which we needed to just explain to customers why they weren't impacted or why this wasn't gonna impact them, and I'm talking about the end customer. But advisors largely understand that a big part of their job and their role is to actually filter the funds that they invest their clients into. So, whilst it was unfortunate that it occurred, we don't believe that it's had any long-term reputational impact. And certainly, you know, we remain very optimistic about the flows and believe that, you know, we've got great momentum going into, certainly into the next half and for the future.
Okay. Thanks very much, Norman.
Our next question comes from Lafitani Sotiriou from MST Financial. Please go ahead with your question.
Thank you for the opportunity to ask some questions. I'll just to kick off first with Macquarie Wrap and two parts to it. You know, one thing they did do was off their menu, and there's quite a bit of backlash. I was just wondering whether you can comment on that aspect of it. But, but more particularly, you know, a lot of industry participants are saying that there's a lot of advisors moving money away from Macquarie Wrap now, and it's not necessarily caught up in the data yet in towards the middle of the December quarter. So, have you guys got a strategy? Are you seeing heightened outflows coming out of Macquarie Wrap? And what do you think about their approach of cutting mass cutting products off the menu?
Thanks, Lat, and also well done on a great piece that you released a couple of weeks ago on AI. So it was excellent. Look, I won't necessarily comment on Macquarie specifically, but in relation to our investment menu, we remain very committed to choice and offering a broad choice to our investors and to advisors. Clearly, there will be some change to the investment menu, but it's really gonna be fo- not particularly well supported or aren't investing into their governance. And we think that there will be some changes around the edges, but we're certain that we offer. Choice is important, but we wanna make sure that we've got a very high quality and diversified menu.
And, so you're not specifically targeting or seeing outsized flows or opportunity there, or you'd prefer not to comment?
I'd prefer not to comment.
Yeah. Moving on to AI, and I get the colors and priority that you gave and the roadmap, but it has accelerated a lot in the last six months and so a few years. So like, if-- are you looking to run faster, deploying it? Are your teams using it more in a more integrated way, or do you think there's quite sort of the three-year view on and how you guys deploy AI?
Yeah, probably all of the above. So adoption over the last couple of years and certainly been implementing Machine Learning well before then. What's really changed is really, I guess, the Agentic AI and also Generative AI, and that has opened up huge opportunities for us, both internally and externally from a client perspective. So we're building our good capability. Hayden can probably attest to it. The business gets sick of me asking them every day about what and how they're using AI in their day-to-day lives. But we're seeing, you know, really good progress from the engineering team.
And if, you know, very simplistically, just to sort of, I guess, paint a bit of a picture, if we've got circa 300-400 engineers, and we can get 25%-30% efficiency from the AI toolkits that we're implementing, that gives us engineers. So we don't necessarily see this as a cost reduction strategy when it comes to new development. We think that it will allow us to slow down headcount growth, but more importantly, it actually allows us to ship and develop more product. And we see that, again, the scale is real at a rate of knots, given the additional efficiencies that we're already seeing from an engineering and product perspective. And that's everything from product design to actual engineering, testing, and code release.
From an operations perspective, clearly, there's huge opportunities. We're continually rolling out programs across the business. We're using a lot of AI for data extraction and data. Sorry, document automation. There's a project, for example, that removed four people from our tax project because all of the data from circa 3,000 or 4,000 tax statements was automatically taken from the documents and processed into our systems. So you know, that's four, but you multiply that by very many similar use cases across the business. The contact center is benefiting massively through AI search and summaries and response. We've got chatbots going live in the coming months.
And broadly across the business, we're seeing people using it more and more in their daily lives as they use sort of Agentic AI within sort of, our environment, to automate a lot of their day-to-day tasks. So the internal efficiencies are only gonna continue to, accelerate, and, and we see, you know, big benefits there. From an external perspective, you know, clearly, looking around the market, for different parts of the ecosystem, you know, that will sort of be a strategy that evolves over the next three years. But as I touched on, we are in a really good position. We've got great internal capability. We've got great data sets, to deliver, great tools for advisors, but more importantly, also to integrate with the tools that advisors are already using.
And I think that combination ultimately really just accelerates advisor efficiency and provides far more capacity for them to see more clients and ultimately to put more business with Netwealth.
That's great. Thank you.
Our next question comes from Anthony Hoo from Ord Minnett. Please go ahead with your question.
Thank you. Morning, everyone. My first question, just on the margin outlook, just for the short term, for the remainder of FY 2026. I mean, your full year guidance is about 49%. Your first half was 49.5 on an adjusted basis. So mathematically, we're implying that the second half margin will be below 40. Is that due to, you know, you continuing to invest in your cost base? Is that a fair way to look at it, and then that sets a base going into that way to look at it?
Anthony, yeah, that is correct. So, you know, if just to do the math in very simple form, 49.5, 48.5, second half might give you 49 overall. Not that that's exactly what we're, you know, guiding to, but, you know, that would be the math. Now, what I would say is I wouldn't necessarily, at the moment, extrapolate 48.5 into FY 2027. As I said earlier, we haven't made a decision yet as to what operational investment stance we take into next year. But you can imagine that with fairly strong top-line growth, that even if we were to do 48.5% in the second half of this year, that that would naturally be incrementing up into FY 2027 in any event.
Sorry.
Go ahead.
Just a second question, just following up. Just wanted to follow up on an earlier question around regulatory costs, you know, the impact from the APRA undertaking. Maybe another way of asking is, you know, if we think about, you know, you talked about your, you know, the costs involved in that is already incorporated into your current outlook or current growth, investment plans. But, you know, can you give us some insight into, you know, as you work through the program, how quickly, is there visibility as to how quickly these costs might fall off?
I'm not too sure whether these things will fall off. As Matt said, you know, the Rise program, this is, an investment that we are making-
And look, it's partly in responding. I think more broadly, what First Guardian and Shield are highlighting is that the industry's requirements on the industry will be different in the future to what expectations were in the past. And so that will result in some higher costs. We don't think we're gonna be unique in that situation. But the point that we made about they will form part of our planned headcount, I think underline that you can take away that, you know, naturally investing in this area. And because it, the regulatory moat is actually quite a good comparative advantage to have, you know, it's not necessarily a reaction. It's actually, you know, just becomes an area of strategic investment as well.
Okay, no, that's great. Thanks a lot.
From James Bales from Morgan Stanley. Please go ahead with your question.
Hi, guys. Thanks for taking the question. Just to follow up to an earlier one on inflows and how you're positioned there. You basically said that First Guardian issues hadn't impacted the performance of the business, but I guess that flows are sort of very backward-looking. When you look at what your prospects, conversions, et cetera, on their most forward-looking metrics, is that still holding up the way you'd hope?
The short answer is yes, absolutely. And went through it again with the team last night, and was very pleased with not only the size of the conversion rates. So, we still remain, as per outlook, very optimistic about the future, including the, I guess, the new opportunities and the new markets that we're pushing into or getting the benefit from existing customers.
Yeah, perfect. Thanks, guys.
Unfortunately, we do have a hard stop, or did have a hard stop at 10:15. So we won't be able to take any more questions, but by all means, feel free to reach out if you do have follow-up questions.
Ladies and gentlemen, that will conclude our conference call.