Monday, January 19, 2015

Platform Fee is Killing Me

Total platform fee I paid to FSM in 2014 was $505.51.

Total profit I made was $3207.68 or 1.47% of total capital on an average weighted basis. Without platform fees, I would make $3713.19 or 1.7% of total capital on average weighted basis.

Platform fee cut my annual return by around 0.23% or 13.61% of my 2014 profit.  When market is good and I make above average profit, 0.23% cut probably is not big deal. But when return is just "so so", yes it is a big deal. And in the long run, it's a very big deal.

So I've been thinking for lower cost alternative investment such as ETF and even build my own dividend portfolio. For this purpose I've been looking at offerings from TD Ameritrade (thinkorswim) and E*TRADE.

TD Ameritrade offers a wide range of commission free ETF, however they currently do not have a local bank account to facilitate local fund transfer. They can only accept international wire transfer which will cost $25-$30 per transfer. They're willing to reimburse the cost incurred for international wire transfer up to USD 100. However as I will be doing a regular contribution instead of a lump sump transfer, this will not work for me. They said they would offer a local fund transfer facility by Q1 this year. 

E*TRADE on the other hand offers local fund transfer, and offer some commission free ETF. However the more liquid ETF (such as VanGuard) are not free of commission.

Anybody has any comments or suggestions? You're more than welcome to leave your suggestions.

Thank you.


  1. Hi there, as you may wish to try building your own dividend portfolio. Although stock picking is abit more tricky as compared to unit trust investing. Alternatively, you can try local brokerages which allow you to trade the US market, which will give you wider selection of ETFs. Although I'm not sure of the transaction / holding costs involved for that option. Cheers.

    1. Hi Royston, thanks for your suggestion. One of my criteria is to be able to have investment exposure in US and other developed markets. Unfortunately the local brokerage can be very expensive for investing in US because their higher commission and other charges. I'll study them in more details before making my final decision.

  2. Fsm platform fees is a silent killer, but they do have lotsa funds, sgd hedged etc etc that makes it less problematic to buy in usd and etfs

    If you still believe in unit trusts, can consider dollardex or poems... transfer to them ur fsm funds

    1. Hi Darte, thanks for your suggestion. Indeed the choice of funds, simple interfaces, reports, and conveniences were the reason I signed up with them. I definitely will keep investing part of my portfolio in unit trusts, while I'm diversifying to ETF and dividend portfolio.

  3. Hello Yaruzi,

    I think this platform thing is the least of your concerns ;)

    Nothing a "simple" comparison shopping between 3 shops will not solve.

    I think a much more fundamental question is whether you are an investor, trader, or hybrid like me?

    I see your fingers are getting a bit itchy to trade ETFs.

    You may want to review what got you into unit trusts in the first place - they are horrible trading vehicles. And what made you choose FSM from the beginning?

    And if you want a dividend portfolio, do note that US have a murderous 30% withholding tax on the dividends.

    The answers from your reflection may help you on your research as to why some US discount brokers can give "free" commissions. You may want to find out HOW they make money from you then ;)

    Do not mix up low transactions costs with the running costs of a unit trust or ETF.

    Not all ETFs are "low cost"; and not all unit trusts have high management fees ;)

    Have fun!

    1. Hi Man of Leisure, thanks for sharing your view. I would consider myself a hybrid, though I will positioned the bulk of my portfolio as investment and a lesser part for trading when such opportunity arise.

      Hmm you made me thinking now :-)? Do you have more information on the "HOW"? Appreciated if you could point me to resources where I can find more information about it. Thanks.

    2. Yaruzi,

      Just call me SMOL :)

      Pop by any local full service brokerage and ask about trading US ETFs (and unit trusts)- find out their charges, fees, commissions, etc.

      Then casually mentioned that you "heard" US discount brokers.... Grab some popcorn, watch the body language, and listen to their counter-arguments against these discount brokers ;)

      You may want to do the same by calling or writing to the US discount brokers and ask why you should do business with them instead of our local full service brokerages...

      While doing it, you may want to role-play how you would handle the "I want my money back" if an overseas brokerage goes belly-up like MF Global or as in the case of the recent CHF tsunami, some spot forex brokers went insolvent... Do they even have a local office for you to bang your fists on their door?

      Talking about Spot Forex brokers, I think that's a good place for you to do research. Investigate the differences between trading currency futures (transparent commissions, fees, etc) and spot forex with brokers that offer "free" commissions ;)

      We get what we pay for.

      Don't fly with discount airlines and expect SIA service ;)

    3. Yaruzi,

      I think you didn't get my hint.

      Platform fee WON'T kill you. Like CW has also hinted to you below.

      Knowing what horse to ride when investing and which vehicle to use when trading can be MORE important.

      I sweat when I see you with unit trusts and talking about "trading" Gold miners!?

      1) Most people don't buy unit trusts; they are SOLD unit trusts.

      2) ETFs are great trading vehicles initially created for institutions like Hedge Funds.

      3) More money has been lost by investors investing in Gold miners than any other sectors.

      Gold miners are great trading vehicle for traders with strong stomach; not long term buy and
      hold vehicle for the timid.

      In case you want to trade Gold miners, check out ETFs like GDX and GDXJ.

      4) Physical gold, paper gold, gold miners are same same but different. I mean you by-passed the two other less volatile versions and jump straight into the most sophisticated version!!!???

      I stand corrected if you are now working in the Gold mining industry.

      If you are drinking your own poison, that's OK. Crash got sound. It's part of learning the trade.

      But if someone is "feeding" you poisonous ideas, you may want to press the "hold" button.

      I apologize for my kaypohness :(

    4. Hi SMOL,

      It's good to have an alternative views and sharing your view is greatly appreciated. The gold miners in my portfolio are mainly for "trade".

      Noted on your comments in regards to platform fee.

  4. These charges are small overheads for doing business with Mr. Market.

    Focus on improving your net profits to build wealth to retire at 36


  5. Hi Createwealth8888, thanks for your insight as well. I'm now 38, I started unit trust investing when I was 36 :-). Retirement, hmmm, I hope I can do that when I'm in my early 50.

  6. If you still have UT in FSM, then if you intend to hold for LT, then it is better to transfer to POEMs or others where there is no Platform fee. I have shifted all my UT to POEM as I intend to keep it for more than 3 years, I prefer to pay a one time upfront fee than a quarterly platform fee that is based on the total value of my portfolio regardless where it is performing or not.

    1. Ruby, how long it took for the transfer process? I was also thinking to liquidate gradually and transfer the fund to grow my low cost portfolio.