Martin Lee @ Sg
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Fundsupermart to Impose Platform Fees

Recently, Fundsupermart (FSM), a popular platform used by many retail DIY investors to buy unit trusts, announced that they would be charging their users a platform fee with effect from May 2010. The charges will apply to investments made using cash or SRS. Increasing operating costs has been cited as one of the reasons for imposing the fee.

fundsupermart

Under the new pricing structure, investors would expect to pay an additional 0.5% p.a. for equity funds and 0.2% p.a. for bond funds. To make up for the platform fees, upfront sales charges would be reduced. In addition, there will be a short promotion of 0.75% sales charge from 1st to 22nd April 2010.

The complete new pricing structure can be found here:

Changes to FSM’s Pricing Structure

The suddenness of the news surprised many of FSM’s users and as expected, a number of them are unhappy about the new charges being forced on them.

Many DIY investors prefer to keep their costs of investments low. In the absence of a superior value differentiation, they will simply go to where the lowest cost platform is.

Dollardex, one of FSM’s main competitors, has been quick to react on the news. An email with the subject heading “Transfer to Dollardex” has been sent to all their users. The section of their website that has the FAQ on fund transfers has also been updated. At the same time, they have reduced their upfront sales charge on selected bond funds to 0.5% permanently.

Personally, I think the latest move by FSM could backfire on them.

I can see an exodus of their users to alternative platforms like Dollardex. One of my friends even contacted me about transferring his holdings with FSM to me under a non-wrap account, which does not have any on-going fees.

The amount that FSM stands to lose (in the form of trailer fees) could be more than the additional platform fees that they are going to collect.

I think a better way for FSM to implement the platform fee thing is to allow their users a choice of whether they wanted to pay platform fees. Those who paid platform fees could be given unlimited free switching while those who did not would have to pay every time they made a switch.

Most buy and hold investors would be happy to stay with FSM under the no platform fee and no free switching model while those who buy and sell a lot might even be better off paying the platform fee to get unlimited switching.

This is also how Dollardex introduced their “on-going fee” model a couple of years ago. They allowed their users a choice between paying no fee and paying an on-going fee in return for advice.

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Leave a Comment:

16 comments
Danielle says 13 years ago

Hi
Interesting comments. could someone refer me to an IFA who can perhaps provide alternative switching for unit trusts -at low or very minimal switching fees and a nominal wrap fee? Thanks

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Daniel P says 14 years ago

I think there is no way any investor can be better off staying with FSM, since the platform fee is charged on the entire portfolio and the discounted sales charge is only on the purchase amount. Maybe if they do not have any sales charge, that might even things up for investors.

I figure only investors who do an aweful lot of switching may benefit as they may exceed the free switches limit.

From the changes they have recently implemented and say they will implement, I think FSM has realised they probably made a booboo.

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Robert says 14 years ago

I am half way out from FSM too. However, I am still very curious why they are introducing this fee. Being an established fund distributor, I supposed they must have assessed the impact of implementing such fee. Seriously, I doubt there are a lot of people who are willing to pay this fee.

Being an financial intermediary, it does not make sense to chase your customers away. The lesser the number of customers, the lower the economies of scale. The fund managers may also find it less attractive to sell their funds through this distributor when there are lesser customers. No matter how I look at it, it is still a lose-lose situation to implement this fee.

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    lioninvestor says 14 years ago

    Hi Robert,

    Personally, I think it’s a very bad business decision.

    Reply
Jasmin says 14 years ago

I am already half way out from FSM.

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Daniel P says 14 years ago

I wonder if Fundsupermart will reverse their decision, if many many clients ask them how to transfer out their fund holdings.

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Intheknow says 14 years ago

it is a fee charged on current holdings even if you don’t buy or sell for the entire year.

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    lioninvestor says 14 years ago

    It’s a fee on holdings even if you don’t buy or sell anything.

    Reply
sureesh says 14 years ago

So the platform fees have to be paid only when you buy or sell or
even for holding your current holdings

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    lioninvestor says 14 years ago

    It’s charged on your holdings even if you don’t buy or sell anything.

    Accrued daily but deducted quarterly.

    Reply
Daniel P says 14 years ago

This appears to be a result of the investors who did not bother to check what they were buying in the minibomb saga. I guess this is the response to all those complains to MAS.

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Garrett says 14 years ago

I think another issue that has been overshadowed by FSM wrap fee is the reasons that FSM has given, specifically the rising costs of staying in compliance with MAS new regulation. Amongst one of those imminent soon-to-be-introduced regulations is one that requires some kind of “customer knowledge test”. It seems that a 3rd party would determine if the customers are saavy/educated/smart enough to be granted access to various investment instruments. As an IFA, I don’t suppose you have learnt about this and how it is going to affect investments in Singapore?

Personally, I find that proposed regulation a joke and I hope it doesn’t turn into law! How ridiculous is it? I must pass an exam to invest my own money???

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