iFAST: Why iFAST can afford free SGX trades

Why is iFAST cutting their SGX stockbroking fee to SGD8.80 fee for even a SGD1 million trade? 

First, stockbroking is not the main business model of iFAST. Stockbroking transaction fees only made up 12.8% of their 2020 net revenue. iFAST is a diversified wealth management platform offering unit trusts, bonds and insurance products and they are focused on maximizing recurring income. Lower stockbroking fees may attract new users who may eventually end up buying other products such as unit trusts, bonds and insurance products which generate lucrative recurring fees such as trailer fees and platform fees.

Second, lower stockbroking fees will feed the iFAST flywheel by attracting new users. More users => More assets under administration => more funds listing new products on iFAST platforms which will eventually attract more users

Lastly, this move should help iFAST to win market share from Singapore stockbrokers who typically charge at least SGD25 per trade or 0.28%. With stockbroking fees making up such a small part of net revenue, I’ll argue that iFAST can afford to cut stockbroking fees to zero. That’s a playbook used by Charles Schwab in the US. Ensemble Capital has a great piece on this move.

In short, cutting stockbroking fees will lead to a stronger moat for iFAST and is a key part of their plan to grow assets under administration to SGD100 billion by 2028. iFAST is still the largest position in my portfolio and I’m excited to see how this move will affect the company’s 2Q results.  

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