2015 was our first full financial year since our IPO in December 2014. In many ways, 2015 was a continuation of our mission with our investors and wealth advisers, and we have achieved a number of milestones despite a challenging market environment.
Our mission statement, 'To help investors around the world invest globally and profitably', has been a guiding principle for us. In 2015, we have focused on achieving that, by continually improving the range of products and services for our customers and wealth advisers.
Strengthening Our Platform Capabilities
Following our distribution of bonds and ETFs in Singapore in May 2015, our Singapore and Hong Kong businesses now offer an improved range of products to complement funds, our core investment offering. Our platform now provides over 2,500 investment products that we think are relatively simple and transparent in structure, so investors do not have to worry if there is a hidden cost behind an investment product.
Besides transparency in the fee and product structure, we have continued to emphasise the research aspect when we roll out new services. Similar to the way we rolled out funds in Singapore in 2000, where we emphasised on funds-related research, our launch of Bonds@FSM (where investors can transact in bonds) and Bondsupermart.com (a bond-information portal) have extensive research on bonds, because only with greater awareness can investors make a more informed decision.
We hope that the distribution of bonds, and the research we provide, will help the investor community invest globally and profitably. Information on bonds has been very opaque in Singapore, with the distribution very much offered to institutional and high net worth investors. The public in general has had little access and little information on how bonds can add value to their portfolio, especially in a low interest rate environment.
With the introduction of new investment products, we also hope that wealth advisers now have additional tools to better service the wealth management needs of high net worth clients, taking them a step closer to our goal of empowering them with the capabilities of a mini private bank.
The sudden suspension of the Capital Investment Entrant Scheme (CIES) in early 2015 and headwinds from the heightened volatility in equity markets, especially in China, have negatively impacted growth in our Hong Kong business in 2015. Market volatility is part and parcel of the investment world. How we react to these headwinds is important for our customers and wealth advisers, and in 2015, we have worked hard to offer value-added services to them.
The launch of the online discretionary portfolio management services on our FSM Hong Kong platform is to help investors who find investing too complicated and time-consuming. Often, because of the noise from many media sources, it is hard to stay rational and that is when the mistake of buying high and selling low happens. With a range of portfolios managed by our portfolio management team, investors now have an added service that can greatly help them stay invested throughout the different market cycles, without having to fret about what and when to buy or sell.
We have also completed the acquisition of a stockbroking firm in Hong Kong, which will add stockbroking capabilities onto our platform. The introduction of stocks will help enhance our range of investment products for our customers and wealth advisers. The soft launch of our China business in March 2016 will also help our Hong Kong business, because wealth advisers servicing clients from China will find the range of global products we offer in Hong Kong to be a good addition to the range of onshore funds in China.
Our Malaysia business joined our Singapore and Hong Kong operations in turning a full year profit in 2015. We are encouraged by the growth in the Malaysia market and we expect that our B2C and B2B divisions will continue to see good growth going forward, helped by an improvement in the range of products and services we offer to them.
Entering A New Market: China
In China, we are excited to be one of the first foreign companies to be given a Funds Distributor Qualification. With that, we will be launching our investment platform business in 2016. As we enter the China market, we are tweaking our business strategy slightly to suit the local environment.
In the B2B business, we are adopting a 'platform-cumIFA incubator' strategy in China. We believe this will help us to scale up faster in China compared to how we have historically built the business in Singapore, Hong Kong and Malaysia. We are hiring wealth advisers to join us in our China licensed entity, and we are providing support in many areas as they grow their client base, AUA and recurring income. For wealth advisers who have greater long-term aspirations, we will support them in their quest to start their own IFA companies in future, while continuing to empower them with our platform capabilities. At the same time, we will continue to look for potential B2B financial institutions to sign up on our B2B platform.
Our B2C strategy in China is tweaked to make it more scalable: we intend to have partnerships with local Chinese companies that have a well-established online client base, including Internet or online media companies.
We have mentioned in our results announcements that we intend to explore the possibility of selling a minority stake in iFAST China to institutional and/or other investors in the next 1-2 years. If that materialises, iFAST Corp may see cash injections into the iFAST China business, thereby helping to further strengthen the overall financial strength of iFAST China (and therefore, the Group).
There are several reasons for this intention. Firstly, we are of the view that in starting our business in a huge market like China, we should look to strengthen the overall financial strength of iFAST China as much as possible. This will allow us to seize various potential opportunities in this rapidly developing and evolving market.
Secondly, we do not discount the possibility that in the medium to long term (say, 5 to 8 years), we will consider spinning iFAST China off as a separately-listed subsidiary. We take the view that iFAST Corp does not need to own 100% of iFAST China, though ideally we would like to maintain at least 50% in the medium to long term. This will allow the employees and wealth advisers of iFAST China to participate in the long-term growth of the China business, thereby aligning the interests of management/employees/ advisers with the interest of shareholders.
We expect iFAST China to incur operating losses in 2016 and 2017, since we are in the initial stages of building the China business. On the other hand, if the sale of a minority stake in iFAST China materialises, we may see a gain through the cash injection/injections, although any such gain may be recognised in reserves instead of the income statement of the Group.
Dividend Guidance For 2016
In 2015, the Group’s dividend payout was based on 60% of the Group’s net profit. For 2016, the Group’s dividend guidance is: For FY2016, our Directors intend to recommend and distribute dividends of 60% of our Group’s net profit (excluding our China operation, and exceptional items).
Our somewhat unusual dividend guidance for 2016 takes into account two factors. Firstly, we would like our shareholders to understand that even as we commence building our China business and incur some initial operating losses, our existing businesses in Singapore, Hong Kong and Malaysia are in the meantime generating good positive operating cash flows. The Group has a strong balance sheet, and the Directors are comfortable with pegging the Group’s dividend payout to the profitability of the Group excluding China, especially since iFAST China may see potential cash injections through the sale of a minority stake.
Secondly, we would also like our shareholders to understand our approach towards creating shareholder value in the long term, rather than being purely guided by short-term quarterly profits which at times may be masked by initial start-up losses in new markets. We are clear that we need to have a good balance between managing our growth and profitability in the short term and investing enough to ensure that we will have sufficiently robust long-term growth.
Focus on Transparency and Longer-term Perspectives
The wealth management industry has often been blamed over its zeal over short-term sales and profits, often at the expense of providing honest and competent advice for investors. We have believed in doing business differently from day one.
We believe that we can make a positive difference by continuing to focus on our core values of transparency, integrity and innovation. Transparency in information empowers the investor community. Only when the structure of investment products is made transparent, and only when transparency in the fees and commissions that investors have to pay to their bankers and agents is clear, can a positive impression of the wealth management industry develop.
Our continued focus on ensuring transparency in investment education and fees lies at the forefront of our business. The recognition we received from SIAS in 2015 on being the Most Transparent Company among newlylisted companies was most meaningful to us and we will continue to work hard to ensure our philosophy of being a transparent investment platform for investors and wealth advisers continues.
In the longer term, we expect to see regulators continue to push for greater transparency in the products and commission structure and fintech companies continue to introduce innovative financial solutions. As a fintech platform, we intend to continue working hard to ensure we are at the forefront of these changes because when customers and wealth advisers find value on our platform, we would have built a foundation of trust to keep growing our business.
Lim Chung Chun
Chairman and CEO