iFAST share price faces risk of trailer fee ban?

Lifetime Membership Investors must have that “uh-oh” feeling. iFAST share price looks set for an explosive thrashing following the revelation of net loss of $2.69 million recorded in 2QFY2022. The net loss was a complete reversal from the $7 million net profit recorded in 2QFY2021. The management claimed that the bizarre net loss was attributable to the one-time estimated impairment allowance of $5.2 million from its exit of iFAST India Holdings Pte Ltd (“iFAST India Holdings”). Nonetheless, investors wasted no time punishing the counter as it sank from $4.00 on 22 July to a low of $3.72 on 25 July.

In my blog, I have cautioned before that whenever a listed company announced its financial result in the middle of the night or over the weekends, you can be sure like hell that the result is going to be awful. Indeed, this was what happened to iFAST when the Group released its 1HFY2022 financial result on 23 July 2022 (a Saturday morning). In the good old days, such a strategy could help to break the fall of iFAST share price. However, with the proliferation of financial blogs in Singapore, such trick may not work.

What goes up must come down. iFAST share price became stuff of legend among SGX stocks when the counter rocketed from $1.00 in 2020 to an incredible high of $10 in 2021. But the supersonic form of iFAST share price is simply not sustainable as the counter began to stall in 2022. The meltdown of iFAST was due to its misadventure in India. The latest India move to ban usage of pool account for mutual fund transactions followed the October 2018’s ban by the Indian authorities to ban upfront commissions for mutual funds.

In recent years, many countries are starting to ban sales commissions, such as trailer fees, for mutual funds. Australia, United Kingdom, South Africa, Netherlands and South Korea are among the countries that have already banned sales commissions paid to financial advisors. Recently, Canada jumped on the bandwagon as Ontario Securities Commission banned trailer fee payment by mutual funds effective 1 June 2022. Question now: what would be the implications to iFAST if Singapore or Hong Kong is to implement such a ban? And what on earth is trailer fee and its role in the financial advisory ecosystem?

In my last article on iFAST share price, I cautioned that the stock is at cross-roads as there could be further room for correction in 2022 due to the losses from BFC Bank and uncertainty from the war in Ukraine. I have also predicted that the recovery of iFAST share price may take place only in 2023. An SG Wealth Builder Lifetime member has written in to ask if it is the end of the road for iFAST share price. In this article, I will do a deep dive and assess the long-term outlook for this counter.

Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested and have never invested in iFAST before. Whether iFAST share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.

iFAST share price on time bomb

A trailer fee is a commission that a manager of a fund pays to a financial advisor or distributor. This fee will be paid to the advisor or distributor as long as the investor owns the fund. Trailer fee is known to be controversial in the financial advisory industry due to the potential conflict of interest.

Just imagine this: between a fund that offers a trailer fee and one that does not, which one do you think that the advisor or distributor would choose to promote to the consumers? Due to the incentive from trailer fee, there is a real possibility of mis-selling of products. The Lehman Brother mini-bond crisis that shook Singapore market is a classic example.

For the longest time, I had been struggling to understand why the management of iFAST has been so [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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