As the fallout from the Banking and Financial Services Royal Commission continues to roll on, smaller players could find themselves in the investment spotlight.
As with all earth-shattering events, the full consequences aren’t apparent in the immediate aftermath. In fact, at the time of writing shares in the big four banks went up — investors seemingly relieved the big stick wasn’t bigger.
On the flip-side, NAB’s chief executive and chairman have departed the company as a direct response to the Royal Commission fallout.
But with consumer sentiment around the big banks now at a low-ebb, smaller players in the financial services game could gain traction with both customers and investors.
Expect fintech stories such as Xinja and providers of financial products in less traditional markets to get a run with investors.
Alternate lenders such as Prospa have gained traction, and after some to-and-fro with the ASX it’s thought to be pursuing a listing to take advantage of the momentum [$] to be created in the space post-Royal Commission.
Companies such as Netwealth (ASX:NWL) could profit over unease of institution-backed financial planning, while DomaCom (ASX:DCL) could similarly profit.
After all, there are investors that may still want exposure to the financial services industry as a whole, but the traditional Australian financial services industry will be well-and-truly on the nose.
So those companies who play in the space but are able to demonstrate diversification from anything which may be affected by the Royal Commission may be in a position to pick up interest.
While some of those stories may be playing out in the private space (neo-banking and small business lending in particular), there are very few alternate financial services companies on the ASX which don’t have some exposure to the fallout.
Another company which could see an uptick in interest is Ensurance (ASX:ENA)
While ENA launched in Australia in an attempt to capitalise on the booming construction sector, it’s main game (at the moment) is in the UK.
It not only provides construction insurance in the UK, but has also recently launched a cyber insurance product aimed at the companies in the construction sector.
Given the ongoing responsibilities GDPR compliance is placing on businesses in the UK, it appears to be a smart play.
Most crucially though, its operations and customers are in the UK — meaning that it’s beyond the reach of the Royal Commission (as wide-ranging as it was, it wasn’t that wide-ranging).
In the construction sector, its policies are backed by the likes of Swiss Re and AXA XL as well as via Lloyd’s, enabled by their Lloyd’s cover holder status.
In the cyber insurance sector, it’s partnered with a specialist Lloyd’s Syndicate.
While the company is listed on the ASX, it’s fair to say wider coverage of the company has thus far been limited.
But as investors look over the fallout from the Royal Commission, it could very well be that smaller fish have their moment in the spotlight.
Star Investing has a commercial partnership with some companies mentioned in this article. This content does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
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