Building an investment platform for investors, by investors | ZUU exclusive interview with Leaf Li, CEO, FUTU
Leaf Li Hua is a man of strong convictions. From his early career choice, to his subsequent venture and creation of FUTU – a technology driven investment trading platform – it was his convictions that led him to where he is today.
ZUU online spoke with Li virtually to learn about the newest trading platform to hit our shores, and picked up a few sensible investment tips for our readers.
Embracing technology disruption
A fresh-faced computer science and technology graduate in 2000, Li eschewed attractive job offers from big name companies like Shenzhen Development Bank and Huawei, to join a fledgling technology startup with a big dream known as Tencent.
“I saw how Tencent’s technology could transformed people’s lives with a single app and I wanted to be a part of that evolution,” Li told ZUU online. During his tenure at Tencent, Li was a product director overseeing research and development for products like Tencent QQ and Tencent Video, with a particular focus on user experience.
As the 18th employee of the firm, Li was handsomely rewarded once Tencent went public in 2004 and the value of his stock options rose alongside with Tencent’s business and reputation. This also became his first foray into the stock market.
A less than acceptable trading experience
From the very onset, Li noticed how tedious his trading experience was. The trading software was crude and difficult to use, the platform often unstable, and he couldn’t get any customer support personnel on the phone after 3.30pm in the afternoon. “It was a huge difference in the customer experience I was providing to my customers at Tencent, and what I was getting with my Hong Kong trading brokerages.”
The biggest wake-up call came during the mid-autumn festival of 2007, when his broker showed up at his door to deliver some mooncakes. “Where were my mooncakes in 2004, 2005 and 2006?” Li recalled asking. His broker replied that his commissions in 2007 were much higher than in previous years, so he only received them for that year.
How much did Li have to pay in commissions to receive a box of mooncakes? HK$5 million.
After he got over his surprise, Li realised that he had stepped on a viable business opportunity. “At Tencent, we earn just HK$10 from each QQ customer, but we spare no expense in improving our platform to optimise our customer experience and customer support. I realised then, that there was a huge opportunity to transform the trading industry.”
“Everything about the traditional trading experience that I found inadequate, from product quality to platform stability, even customer support, was everything that I was doing at Tencent. So I thought maybe I could make a significant difference to it, step by step.”
That realisation remained at the back of his mind until Li left Tencent in 2008. “As a product manager, I am constantly wanting to try and change things and make them better, no matter how small. It is a nagging feeling that never goes away. And no one would feel as passionately about it as I did. So I chose this as the next chapter of my entrepreneurial journey.”
A business venture with a purpose
Li eventually founded FUTU in 2012, as a technology based online brokerage with a focus on user experience. Its name represents the phonetic spelling of its Mandarin name 富途, or “the road to wealth”.
“F stands for ‘Fortune’ and T stands for ‘Treasure’,” quips Li, who also adds that FUTU is the abbreviation for ‘For U, To U’, which hints at the firm’s corporate values of putting the customer first, building the platform for the customer, and improving it for their benefit.
At the same time, it also reflects a part of FUTU’s ongoing business plans, as it is the first 4 letters of the word “futures”, which the firm will start to offer later this year.
FUTU was successfully listed on the Nasdaq exchange in 2019, providing a one stop trading platform for Hong Kong stocks, US stocks, and China Connect stocks, more recently, Singapore stocks, to its 13 million users worldwide in over 200 countries and regions. Its daily active users（DAUs） has surpassed 1 million at present.
Building a trading platform with investors in mind
True to his word, Li built up the business with a keen focus on customer experience. The 1,400 strong company has over 1,000 employees solely engaged in product experience and research and development.
In Hong Kong, FUTU is one of a small handful of brokers to offer a proprietary end to end technology platform, which handles everything from trade execution to clearing and settlement. “This technology allows us to control the stability and the quality of trade execution, and our trades can be cleared within 0.0037 seconds, with a consistent 99.98% service availability rate.”
Their apps – Futubull for the Hong Kong market, and Moomoo for the international market – also offers comprehensive market information, timely financial news, and an active social community to help investors make better and faster investment decisions. As a nod to their effort, their platform continues to see higher growth numbers than their smaller competitors, and almost 60% of their new clients in 4Q2020 came from word-of-mouth referrals.
Moomoo Trading costs
In Singapore, FUTU’s Moomoo app is offering a 90-day commission-free trading promotion for the US, Hong Kong and Singapore stock markets, with every successful account opening until the end of April 2021. Investors can also enjoy unlimited access to US Level 2 market data.
Investors who deposit funds of at least US$2,000 or S$2,700, will also receive a $30 cash coupon, 1 free Apple share for the first 10,000 customers, and free OPRA Option Real-time Quotes for the US market.
Beyond the initial promotional period, FUTU is committed to offering lower fees than other traditional financial institutions in Singapore.
Singapore stocks would incur commissions of 0.03% of the transaction amount, with a minimum of S$0.99, and a platform fee of 0.03% of the transaction amount, subject to a minimum of S$1.50.
US stocks, ETFs and ADRs would incur commissions of US$ 0.0049 per share, with a minimum of US$0.99 per order, as well as a fixed platform fee of US$0.005 per share, subject to a minimum of US$1 per order.
For the Hong Kong market, stocks and ETFs incur commission fees of 0.03% of the investment amount or HK$3, depending on which is higher, and a fixed platform fee of HK$15.
Li’s personal investment strategy
To be sure, Li’s personal investment experience has influenced the development of Futubull and moomoo in a big way.
“I have two distinct investment styles,” Li reveals with a smile. “The first is investment by faith, which has to do with my background. I could have chosen to join Shenzhen Development Bank or other financial institutions, and even large technology companies like Huawei, but I chose to join Tencent, because I believed their internet business could change people’s lives through a humble app.”
“When I had the financial capability to invest, I continued to do so based on my belief in internet companies that can disrupt people’s lives for the better. That includes Tencent, Amazon, and Google, businesses that I will hold for the long term.
“For my second investment style, I invest in companies based on promising technical indicators. With this, I believe the key lies in good risk management.”
It is Li’s expertise in technical analysis that has led to FUTU’s apps offering some of the most extensive ranges of technical analysis charts and indicators, as well as comprehensive risk management tools.
Lessons learnt from 2020, and investment advice for 2021.
After a dramatic pandemic-driven 2020, ZUU online took the opportunity to find out what Li considers to be the biggest investment takeaway from 2020 for 2021 and beyond.
“When I look back at 2020, I learned that the “buy and hold” investment strategy was the best,” Li said thoughtfully. “From the first half of the year, when the pandemic struck and markets collapsed, to its recovery in the later part of the year, we saw that most investors who adopted this strategy had some of the best returns on their investment. But others who hedged or engaged in short term high frequency trading, their returns were considerably lower, and short sellers fared the worst among the lot.”
“For 2021, investors will need to look at the entire market. Some markets are currently seeing high valuations and I believe this trend will likely continue. But we will need to monitor closely as investors may want to take profits this year.”
“Some industries like travel and airlines were obviously hit pretty badly by Covid-19 last year,” he continues. “So as the vaccines get rolled out, these sectors may have breakout opportunities.”
Best advice for new investors
So what advice does Li have for new investors?
“Here’s something I learned early in my investment journey. ‘Follow a system, rather than your emotions’,” says Li.
“You need to follow an investment philosophy or system, and not be swayed by your own emotions. First of all, you must be clear about your objectives: why you want to invest. Then you need to be clear about what your investment motives are, and develop your own mechanism to invest.”
“That way, you won’t be easily persuaded by someone who says a company or product is a good investment, when it is not suitable for you. On the flipside, you won’t find yourself deciding to sell a position quickly when prices fall, or after you’ve had a quarrel with someone.”
“When investing, you will find yourself in a lot of emotional turmoil, so don’t be led by it.”