Leading the evolution of a fintech company with a simple investment conviction | An exclusive interview with Lim Chung Chun, CEO, iFAST Corporation
Lim Chung Chun, may be the co-founder and CEO of homegrown wealth management firm iFAST Corporation, but he is still an investor at heart and a research analyst at his core.
An electrical engineer by training, Lim spent 8 years as a research analyst at a stockbroking firm, working his way up to become the head of research. From the very beginning, he maintained a long term investment focus, only recommending stocks that he would personally invest in, so investors could invest profitably as well.
He left his role in 1998 to focus on investing his own funds and those of a few private investors, when he stumbled upon the idea of starting an online unit trust distribution business. At the turn of the century, Fundsupermart was born.
Since then, the business has grown from strength to strength, expanding into 5 other countries, getting listed on the Singapore Exchange as iFAST Corporation, and evolving into a comprehensive wealth management platform, all while following Lim’s simple investment philosophy.
The journey, however, was far from easy. Over the past 20 years, iFAST Corporation has seen its fair share of downturns and crises: the dot com bust, the 2003 Sars outbreak, the global financial crisis (GFC) of 2008, and the current Covid-19 pandemic.
Lim sat down with ZUU online to talk about how iFAST overcame it all.
Building a business in adversity
iFAST’s fledgling business started at the prime of the dotcom boom, when access to capital was readily available. But things quickly took a turn for the worst when the market collapsed, and iFAST was left on its own to grow its business in the bear market that followed.
Then Sars happened in 2003. “That was the period in our history that I felt the most worried, because we’d just gone through a 2 and a half year long bear market, and it culminated in a crisis that we had never seen before,” admitted Lim.
“People didn’t dare to go out, and suddenly we had to worry about whether our staff might run the risk of having to be quarantined. So we had to split the headcount and things like that.” A potential investor was spooked by the outbreak and withdrew their interest in investing in the company, dealing a huge blow to the business.
“At that time, we were burning $200,000 to 300,000 a month. It is not much in today’s terms for an internet company, but it was still sizeable for us, because the world had lost faith in internet companies and it was a really tough environment to operate in.”
Lim decided to invest most of his own personal money into the business, to demonstrate his commitment to making the business succeed. Other investors were convinced and came onboard and helped the company tide over that uncertain period.
“When you start a business, you will go through a lot of uncertainties. So if you want the business to succeed, then someone in a key position needs to be convinced that the business will make it,” said Lim. “I suppose I was the person playing that role in iFAST.”
“Of course, that does not mean assuming that the current business strategy is correct. Instead, we were constantly re-evaluating the overall strategy, questioning why our numbers were not there, and looking for ways to ensure the overall strategy worked.”
The company finally started to see the fruits of its labour in 2004 when the business achieved its first $500 million in assets under administration (AUA) and turned profitable.
Sadly, that was not the end of iFAST’s troubles. In 2008, the global economy collapsed right as the company started expanding into Hong Kong, Malaysia and India. “On hindsight, we might have put additional stress on the group during that period, by starting up in so many new countries at once, but it was a necessary phase we went through that helped us to continue growing,” quipped Lim.
That regional expansion eventually laid the foundation for iFAST’s current global footprint spanning 5 countries, including China. iFAST Corporation was listed on the Singapore bourse in 2014, and it marked an era of product expansion, and its foray into wealth management services.
By the time the current Covid-19 pandemic rolled around, iFAST had built up a strong business position, both in Singapore and in the region. Lim was relatively unfazed as well, with the distinct memory of the Sars outbreak, and activated business continuity plans to segregate his staff and enable them to work from home. “We have been focused on overcoming the risk of business disruption, and fortunately we are more prepared these days, than we had been in the past,” he said.
A fintech pioneer
iFAST has always been a little ahead of its time.
As a pioneer of the Singapore fintech industry – existing even before the term “fintech” was coined – Fundsupermart revolutionised the industry by being the first to provide investors with transparent research and access to unit trusts.
“We started out by genuinely understanding what it takes to invest profitably, so our mission statement – right from start – was to help investors invest globally and profitably in the long run,” says Lim.
Lim believes that equities and fixed income lie at the foundation of long-term profitable investment. Investors who want to invest profitably for the long term only need simple products like direct equities, direct fixed income, and simple packaged products like unit trusts and ETFs that invest into them in a straightforward manner.
The iFAST overall business model is designed around the same investment philosophy. Its product offerings now include stocks, bonds, and ETFs, all with a transparent cost structure, accessible under the FSMOne platform. Even its wealth advisory arm iFAST Global Markets (iGM) provides advice with the same investment focus.
“Through the years, we have focused on providing investors with sound advice, and the products that were good for investors in the long run. When investors are genuinely able to make good returns, they will keep coming back. But that takes time to play out,” said Lim.
Proven business model
Has the iFAST business model worked? Sometimes the proof is in the pudding, or in this case, in its financial performance.
In its most recent quarterly results, iFAST turned in a stellar report card, with record earnings of $3.64 million for 1Q2020, a 126.8% jump y-o-y, and record net revenues of $18.8million, representing a 25.3% y-o-y increase.
The results were particularly significant as the Covid-19 pandemic had already started to take its toil on the global economy, affecting businesses and everyday life. And it was achieved in spite of a 4.6% decline in AUA to $9.54 billion, amid a global sell-off in financial markets.
“Interestingly, the business itself has seen a relatively robust period,” observed Lim, adding that the pandemic had done little to dampen investor interest. In fact, the group saw a record quarterly net inflows of $590 million in client assets on its platforms for the quarter to March.
iFAST is also expecting to see higher earnings and revenues for FY2020 compared to FY2019, unless global financial markets continue to deteriorate, and distributed a first interim dividend of 0.75 cents.
What’s next for iFAST?
Lim has his sights set on the provision of banking services to a global clientele, and has already started by applying for a digital banking license from MAS.
“Many companies in the financial sector are not running a truly global business model, and I make a distinction between being present globally and running a business model that is actually global. We want to do the latter.”
Netflix, he says, runs a truly global business model. With physical headquarters in the United States, Netflix’s content is available worldwide, and its client base is located globally.
In the same manner, Lim wants to be able to provide banking and wealth management services to investors and clients physically living in another country, and he believes that the rapid improvements in technology and the evolving regulatory framework around the world will eventually make this a reality.
His advice to investors in the current pandemic?
“The normal investment philosophy ought to prevail: Buy low, sell high.” says Lim. “It’s easier said than done, because the majority of people will feel like doing the opposite.”
Lim pointed out that valuations in many Asian market were already attractive before the Covid-19 pandemic, and then the sell-off made share prices even more attractive.
“The second point is to bear in mind that, whatever problem we are seeing now is temporary,” he continues. “Of course, some businesses could see quite a drastic drop in profitability over several quarters. But in the overall market, many companies may suffer temporary declines that will not define their long-term value, and that price weakness we see, could be an opportunity to buy.”
An entrepreneur, not a diversified investor
Lim has always advised investors to invest in stocks that they understand and maintain a diversified portfolio, yet he finds it difficult to follow part of his own advice in his personal investment.
“I was investing in a portfolio of stocks throughout my career as an investment analyst, but that changed slightly after I started iFAST. A lot of my personal wealth went into the business and today, it is overwhelmingly my single biggest investment.”
“You need to put your money where your conviction is, and iFAST is a stock that I know better than anybody else in the world, and is within my control to ensure its success,” he said. “Fundamentally, I am still an equity investor, but now it is in a business that I run.”
“It’s not all that diversified,” he admits with a smile. “But as an entrepreneur, I cannot really diversify my time and attention anyway.”