Key takeaways from SGX-DBS Technology Conference
SGX-DBS Technology Conference on 17-18 August 2021
We invited Mr Jean Paul Wong, Director, Corporate Communications, and Ms Tan Chee Wei, Assistant Manager, Corporate Communications of iFAST, to join our conference on 17 August 2021. Below are the key questions raised by participants and also management’s reply.
1. With regards to your AUA target of $100bn by 2028, China is likely to have to play a part. What are you plans for China to achieve this target?
Did not specifically say where it will come from but likely from all existing geographical markets. Focus on being a Unit Trust (UT) distributor in China. Very focused on B2B side there. In terms of strategy, focusing on signing up customers to use iFAST China. Also considering building its own in-house advisory team in China. One of the key drivers of IGM (iFAST Global Markets) is its ability to earn recurring income (rep fee – a fee on its AUA).
Empower more players in the B2B space and continue to build on its inhouse advisors.
2. Over the next 3-5 years, is there a target split of revenue by product segment and geographical mix?
Did not give revenue guidance for the next few years. In the last five years, it has strengthened its ability to provide products and services to its customers (stocks/bonds/ETFs). UT remains important as it is a large part of its AUA. In the next few years, UTs will still remain important. Continuing to expand its platform products and services (e.g. Bursa to Malaysia customers).
Singapore is still the largest contributor and has been growing at the fastest pace compared to HK, MY, and CN. Prepared to go through a period of spending to grow its business in China. Believe that China will grow in importance as a wealth management center.
3. For the HK NPF business, will it be one-off or are there other major similar opportunities?
It is not something that is commonly seen in Asia (size and scale). It was a very unique opportunity.
4. Can you explain more on the IT and technology systems used and whether they are an advantage over your peers?
In the past, they weighed between outsourcing and building their IT systems inhouse. The decision to build inhouse has helped them tremendously. The technology can help existing and new B2B customers. But they do not rely on IT service fees as a core business/revenue. They see it as a way to grow their own ecosystem.
5. How is iFAST different from peers in China? Would Chinese companies prefer local companies?
B2B and IGM strategy for China. On the B2B side, they have been really focused on signing up companies that may or may not be in the financial services/wealth management industry. Not really competing head on against the larger players (e.g. Ant Financial).
6. Why is this strategy optimal?
These B2B players are the smaller players and may not be able to get support from the larger player in China. There’s not a lot of financial services companies providing such services to these smaller B2B players. Competition is not strong in the smaller B2B space.
B2C is very competitive. The fund distributors have a large client base as the customers are probably linked to the Internet giants.
7. How is the product differentiated?
Still providing UTs. What is different is the rep account concept, which is new in China.
8. What kind of market structure (fragmented?) is in the B2B space in China?
Not a lot of players are in.
9. How are we different in terms of pricing?
Not a huge differentiating factor in terms of pricing.
10. How did you arrive at the 100bn AUA target in 2028 and what updates do we have currently?
Annual CAGR of c.27%. Singapore’s AUA contribution may decline to 35% of AUA in 2028 (forecast).
There was initially a view that UTs will decline with the rise of ETFs, but UTs have remained resilient.
Growth has been okay but more muted – bonds. Hope to work on more initiatives to increase the popularity of bonds.
11. Is the slowdown in AUA growth in 2Q21 continuing into 3Q21? Do you think the slowdown will continue in the next 3-5 years?
AUA can be a bit volatile on a q-o-q basis. Market conditions in China had a bit of an impact in 2Q21. Expect the losses to widen this year. Taking a long-term view on China. Prepared to continue investing in China to grow AUA and revenue.
12. Acquisition of DWS will allow iFAST to be a creator of UT. How much do you think it will contribute in 2H21?
Do not expect the transaction to have any material impact on the results for FY21. The reason for the acquisition is not financial. $400m of additional AUA. Some of the DWS AUA was already on the platform. The value of DWS to iFAST is more of the backend side. Look at the cash management solutions side of things. Could be improvements in the settlements cycle for instance.
13. India’s stockbroking business is expected to be in 2H21 and how much do you think it will contribute in 2H21?
Did mention the opening of US stockbroking services to its Indian customers. India is still a relatively smaller market ($500m AUA).
14. Do you think the money that is banned in cryptocurrency (Binance) in Malaysia will flow into iFAST?
Possible. But they already have a belief for investing in cryptocurrency. They will probably use a different exchange rather than switch to stocks/bonds.
15. How do you manage the competition from roboadvisors and does iFAST have any intention to enter the space?
Fairly crowded space. iFAST has their own discretionary portfolio management services (SG, HK, MY, CN). They see fairly good traction in those services.