The newest online investment platform in town still has ambitious plans to become as formidable as leading United States independent broker Charles Schwab despite a rough start.
Last Friday, FSMOne (www. fsmone.com) abruptly halted its stock trading service in Singapore stocks and exchange-traded funds (ETFs) just a day after the website went live. Its appointed counterparty OCBC Securities had pulled the plug on its connection to the Singapore Exchange (SGX), citing a conflict as it offers the same services.
Mr Lim Chung Chun, chairman and chief executive of SGX-listed iFast - which has FSMOne and online unit trust distributor Fundsupermart.com in its stable - was unfazed, saying iFast is already waiting to become an SGX trading member to trade on the local bourse. This means it will be able to offer stock trading for Singapore stocks and ETFs again once it is approved.
FSMOne charges cheaper rates - 0.12 per cent of a stock trade and 0.08 per cent of an ETF trade. Most brokerages here charge retail investors about $25 in brokerage fee per transaction to buy and sell Singapore shares online, regardless of the trade's value.
This is not the first time Mr Lim has had to deal with disruption to iFast's offerings.
In 2013, Fundsupermart sold insurance products on its online platform at a 50 per cent rebate off the lifetime commission, but the offer was withdrawn four days later.
Earlier this year, the Competition Commission of Singapore found financial firms had pressured Fundsupermart to withdraw the offer, and fined those firms for doing so.
Despite FSMOne's false start, Mr Lim told The Straits Times: "Our direction has been to focus on simple investment products such as ETFs, stocks, bonds and unit trusts. We are not fans of structured products created to make things complicated for consumers to understand.
"Focusing on these core asset classes that are simple and transparent means we'll perform better in the long run."
Besides stock trading, FSMOne offers access to insurance products and other services, meaning "the potential for the investment platform business is huge", said Mr Lim. Running a business model like Charles Schwab's - which has client assets worth US$2.46 trillion (S$3.5 trillion) - encourages clients to grow their assets and their wealth over the long run with the firm. iFast has assets under administration of about $6 billion as at Sept 30.
"There are two main models. One is more transaction-based, which is what most of the Asian stock brokers do. They rely on transactional income and the margin trading part of the business which gives them additional net interest income.
"Another model that has worked very well in the US and Britain is the investment platform model that focuses on aggregating the investment assets. You help clients to efficiently manage their portfolio, and you don't have to depend on the client to 'churn' the account too much."
Mr Lim said FSMOne is able to offer competitive rates, and maintain them for a long time, because it does not have to count on stockbroking transactions for revenue.
"We started with a different starting point with unit trusts as the main business. Over the years, we've aggregated a good base and have a strong stream of recurring income from the main business," he said, adding that recurring income makes up 80 per cent of iFast's revenue.
FSMOne plans to offer US stocks in a few months.
"We'll make China stocks, through the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect, available probably in the second half of next year," noted Mr Lim, adding that the firm has also acquired a stockbroking firm in Hong Kong.
FSMOne levies no sales charges for all funds and unit trusts or to invest through five investment portfolios created by robo-advisers.
Accredited investors can also buy selected bonds from just $5,000, as opposed to the market practice of starting from $250,000 for a wholesale bond.
FSMOne is also looking to be competitive in insurance, offering products with a transparent fee and commission rebate structure of 30 to 40 per cent. "Over time we expect this segment to make a bigger difference. We truly want to do it as the most opaque segment of the wealth management business is insurance," said Mr Lim.
"Very often, what consumers buy are not just protection products but also investment types which lock them into long periods. Such products also tend to be complicated and there's not much transparency in terms of commission rates advisers get."
Mr Lim noted that banks are not that transparent either.
"A lot of them have effectively become tied agents, signing exclusive deals with big, upfront payments without selling a single policy, and they get more commission each time someone buys a policy. It's difficult to assume consumers are getting a good deal.
"Exclusive distribution deals are a trend and the industry still wants to remain in the mode of having distribution power to sell its products."
He believes the sector will improve in the next three years as consumers accept a fee-based model like in Britain. "We feel strongly the industry will shift in the next three years and we want to be a champion of this transparent business model. It's time for the advisory industry to change."
This article was first published on Dec 12, 2016.
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