Sydney fund manager InvestSMART generated a reported loss of $1.7 million for financial year 2019, an 869 per cent plunge from its profit of $230,284 the year before.
Revenue came to $11.9 million for the year, dropping by 11 per cent from FY18.
The company produced $11.4 million in total income for the year, down by 9 per cent from the year before.
The biggest contributor to income, fund management commissions, brought in $4.6 million, falling by 7 per cent from FY18.
Meanwhile funds management fees created an income of $764,953 for the group, more than doubling from $347,667 the year before.
Subscription income across its intelligence services Eureka Report and Intelligent Investor came to $4.2 million, dwindling by 16 per cent, while commissions income from insurance came to $1.7 million, down by 11 per cent.
InvestSMART anticipates the government’s ban on grandfathered trailing commissions to come in 2021 will further draw from its earnings, but the company remains positive it is well positioned to become a dominant player in the emerging online wealth industry.
Clients have already moved to products that do not pay commissions.
Its strategy is to build revenue through in-house, low-cost investment solutions, and to grow subscribers over the coming years to offset the loss of commission income.
“Fund managers in general are already preparing, revising their product offerings and rebating trail commissions directly to clients,” InvestSMART said in an update to shareholders.
“We expect commission income from our grandfathered trail book to continue falling between now and January 2021. Our focus is on building funds under management (FUM) in our own products, especially InvestSMART passive funds and Intelligent investor active funds, to mitigate the loss of these commissions.”
Long term, the company anticipates its mass-market digital advice products and direct distribution channel will boost it in the sector.
The platform has around 678,640 active members, with its total portfolio value at $28.6 billion, up by 8 per cent.
InvestSMART’s free app now has now had more than 50,000 downloads.
The total number of paying subscription members fell flat but it expects it will be able to convert free users in the future.
On the wealth sector being in regulatory flux, InvestSMART commented: “We believe the changes align with InvestSMART’s strategy.”
“Our suite of products already meets the more demanding expectations of regulators and the broader community alike, which is why we think the future of digital financial advice is bright. Our direct-to-client distribution channels, capped fee products and active management funds are among the best the industry has to offer.”
InvestSMART had loss per share of 1.6 cents, down from its prior earnings per share of 0.17 cents the year before.
The company’s share price as of Wednesday was 8 cents. A year before, it had been 17 cents.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].