Chairman's Statement

Dear Shareholders,
A period of transition for the wealth management industry
We believe that the wealth management industry in Singapore and in most of the markets that the Group is present in will be going through very substantial changes in the next three to five years. A combination of the disruptive power of the Fintech players and the changing regulations that require financial intermediaries to be more client-centric will drive major changes.

The disruptive power of the Internet and the Fintech industry goes far beyond technologies and tools that makes transactions easy and seamless. It is equally about the empowerment of the consumers. Traditionally, the wealth management industry has been driven more by business practices that take care of the interests of the financial intermediaries and product manufacturers rather than the interest of the clients. That means financial intermediaries tend to prefer to sell high margin bundled or complicated products rather than lower margin, simple financial products. There are tremendous rooms for financial intermediaries to end up giving commission-conflicted financial advice.

However, the Internet has the increasing ability to empower the consumers to make far more informed and educated decisions when it comes to investments and financial planning. As with most industries whereby the Internet has made a big impact, we believe that the future of the wealth management industry will belong to financial intermediaries who not only have the technologies to handle the increasing demands of the clients, but also the DNA and business practices that seek to sincerely and honestly provide true financial education to the consumers.

We believe that investment platforms that can effectively “help investors around the world invest globally and profitably” are those that properly empower the investors and advisers with a good range of simple investment products (unit trusts, ETFs, bonds and stocks).

2016 – Progress and Setbacks

2016 was a year whereby the company has made substantial progress in putting in place most of the capabilities and strategies required to position ourselves for the changes that we envision for the wealth management industry.

Unfortunately, from the perspectives of the financials, 2016 had been a tough year for the Group. Sales and revenue declined year-on-year, even as we focused on increasing our expenditure to prepare our business for the next wave of growth. Market conditions in the first half of 2016 were especially tough, but our results improved in the second half as equity markets, especially in Asia, rallied. This had a positive impact on our AUA, which hit a record high of $6.1 billion as at 31 December 2016.

In the last couple of years, we have been communicating to investors about our goal to improve the range and depth of the products and services we offer to our clients. The good news is that we are well on track in achieving this for our clients. The improved range of products and services puts us in a much stronger position to reach out to new client segments, be it in the retail or high net worth space.

We have also been very clear that a seamless client experience is necessary with the expansion of products and services. As a fintech company, we continue to put in resources to develop IT solutions that can give our clients a seamless experience when they navigate through the various products and services.

Expenditure has therefore been increasing but we see this as necessary to put our business on a much stronger footing to face the future challenges ahead. Capital expenditure went up to $6.61 million in 2016 as our fintech solutions were rolled out, with the most obvious development – the rollout of FSMOne – taking place in our Singapore B2C operation.

With FSMOne, the investor community can now transact in funds, bonds, stocks, ETFs and FSM MAPS, our robo-advisory portfolios, in one account. This is how we see the investor community transacting in future – seamlessly, securely and quickly between different types of asset classes to take advantage of different market opportunities and achieve their financial goals. All these new services are supported with our traditional focus on giving good research ideas, financial education tips, topnotch client services and a pleasant user experience.

We are excited about how our plans are coming together because these will give us the impetus to offer wealth management solutions that are seamless and transparent for the investor and adviser communities. Our focus on providing the best services is also extended to our B2B advisers who continue to give us feedback on how they can improve their fintech solutions in a rapidly-evolving and competitive financial landscape.

We believe the regulatory environment will continue to favour innovation and transparency in the financial sector. Innovation and transparency are themes we embrace and we strongly believe the environment is ripe in giving our B2B partners a hand in building the 'Future Adviser' – someone who builds longer–term recurring revenue based on AUA that is wrapped around multiple products, with transparent fees on all products, including insurance products (which continue to be sold with an opaque fee structure by many bankers and agents, to the detriment of clients).

2016 also saw us launching our China business. The China market is a competitive market, with large established players in the B2C fund distribution space. We have communicated to investors that our strategies involve both the B2B platform services as well as to build our own team of wealth advisers, as part of a 'platform-cum-IFA incubator' strategy. We continue to work on signing up B2B financial institutions and Internet companies to use our platform and IT solutions, areas we have experience in providing in our other markets. Our onshore strategy in China is therefore in place to make business easier for these B2B players.

The other aspect of the China strategy is the offshore business. This is one area where we have a competitive advantage compared to other distributors, because of our licensed operations in markets such as Singapore and Hong Kong. We have seen increasing demand from advisory companies in China which want easy access to the products we distribute in Singapore in more recent times; we see this trend continuing and we are well-placed to offer a convenient plug-in service to these companies to grow and diversify their clients' portfolios into more global products and services.

As a fintech company headquartered in Singapore, with growing operations in Malaysia, Hong Kong and China, we are aware that volatile market conditions would have a negative impact on our business. Even as we do so, we continue to have a very focused approach on what we need to do to put our business on a stronger footing to prepare us for longer-term success. Our mission statement about helping investors invest globally and profitably guides us in how we do business for our clients. Our focus on fintech innovation as well as transparency in fees and information for the investor community are also guiding principles in how we should carry out our business.

We are aware that our approach may sometimes cause disruption in the financial sectors that are often dominated by traditional business approaches and mores on how investors should be treated – if it means these disruptive changes we are introducing are pro-client, we will continue to remain steadfast in achieving this outcome in the markets we operate in. When changes are pro-client, we are confident we will succeed in the longer term despite shorter-term challenges.

Lim Chung Chun
Chairman and CEO