Futu Holdings Limited (NASDAQ: FUTU) (“Futu” or the “Company”) is an advanced technology company transforming the investing experience by offering a fully digitized brokerage and wealth management platform. Technology permeates every part of the business, allowing the Company to offer a redefined user experience built upon an agile, stable, scalable and secure platform. Futu primarily serves the emerging affluent Chinese population, pursuing a massive opportunity to facilitate a once-in-a-generation shift in the wealth management industry and build a digital gateway into broader financial services.
Futu launched the business on the premise that no one should be precluded from investing on the basis of prohibitive transaction costs or market inexperience. It thus designed a platform around an elegant user experience integrating clear and relevant market data, social collaboration and best-in-class trade execution, finding that by delivering the Futu’s vision through a purpose-built technology infrastructure it could disrupt traditional investing conventions. Over the last eight years Futu has continuously enhanced its technology and built a comprehensive, user-oriented and cloud-based platform that is fully-licensed to conduct securities brokerage and wealth management business in Hong Kong.
Futu provides investing services through its proprietary digital platform, Futubull, a highly integrated application accessible through any mobile device, tablet or desktop. The Company’s primary fee-generating services include trade execution and margin financing which allow its clients to trade securities, such as stocks, warrants, options and exchange-traded funds, or ETFs, across different markets. Futu surrounds its trading and margin financing services and enhances its user and client experience with market data and news, research, as well as powerful analytical tools, providing clients with a data rich foundation to simplify the investing decision-making process. In August 2019, Futu launched a mutual fund distribution platform as it executes towards its vision to become an influential global financial services platform. Futu currently offers a variety of money market, fixed income and equity funds products from leading Chinese and global fund houses on its platform, catering to different investment targets and risk preferences of its clients.
Futu broadens its reach and promotes the exchange of information through NiuNiu Community, the Company’s social network services. In contrast to traditional investing platforms and other online brokers, Futu has embedded social media tools to create a network centered around its users and provide connectivity to users, investors, companies, analysts, media and key opinion leaders. This fosters the free flow of information, reduces information asymmetry and supports the investing decision-making process. For instance, users can exchange market views, watch live broadcasts of corporate events and participate in investment education courses offered through the NiuNiu Classroom. Importantly, Futu’s social network serves as a powerful engagement tool. The user activities provide invaluable user data which informs the Company’s product development and monetization efforts.
Futu has a young, active and rapidly expanding user and client base. Our clients are, on average, 36 years old and generally high earning. Over 40% of its clients work in internet, information technology or financial services industries. Futu’s client base is loyal: the Company retained over 98.1% of the paying client base on a quarterly basis in 2019. The Company grows the client base mainly through online and offline marketing and promotional activities, including those through external marketing channels that it cooperates with and directly pays for as well as promotions and marketing campaigns conducted on the Company’s platform, word-of-mouth referrals and its corporate services.
Futu achieved significant growth in its client base. Futu’s paying clients increased from 80,057 as of December 31, 2017 to 132,821 as of December 31, 2018, and further increased to 198,382 as of December 31, 2019. Despite the weak equities market conditions in 2019 in Hong Kong, the Company was still able to achieve 49% year-over-year growth in the number of paying clients. The fast growth rate of the Company’s paying clients was mainly attributable to its unique competitive strengths such as the superior investing experience it provides through its fully digitalized brokerage and wealth management platform, which have enabled the Company to rapidly and continually expand its client base and have fueled the strong momentum of its business.