Taking share from the big banks

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Financials are deeply unpopular given the fallout from the Royal Banking Commission, pending legal actions and the prospect of being a political football into the 2019 election. So why is Aberdeen Standard Investments overweight financials in their small cap strategy? We sat down with Natalie Tam to find out.  

Capital flows have moved away from the incumbents in response to these changing conditions, and a new breed of player has been perfectly positioned to leverage this. Natalie told us in this short interview that: “The companies that we invest in, some of them are beneficiaries from the outcomes and the revelations of the Royal Banking Commission.” She provides a short overview here, and nominates two companies that leverage this accelerating trend. 

 

Edited transcript 

“We do have an overweight position in financials in our small cap strategy. And I think when you think about financials in an Australian context, you think about banks, which have obviously under performed because of some of the quite frankly stunning revelations that have come out of the Royal Commission. 

But actually in small caps we don't have any banks in our universe, and the companies that we invest in, some of them are beneficiaries from the outcomes and the revelations of the Royal Banking Commission. 

So we hold stocks like Netwealth and HUB24. And these are stocks that have been benefiting from a trend away from bank-owned platforms towards independent specialty platforms. 

And that trend has been supported by the fact that these platforms have more modern technology with more features and functionality. They allow managed accounts and so on, but also because of that independence that a specialty platform can provide away from a bank-owned platform. 

And I think the Royal Commission is if anything only going to accelerate that trend, because it's really put a spotlight on the inherent conflicts of interest within bank-owned platforms that manufacture their own products and sell them on their own platforms. 

So we can see that there are opportunities coming out of the Royal Commission as well”. 

Further insights

If you would like to read more analysis from the team at Aberdeen Standard, please visit their website


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