Insurance companies then joined in the fray when they launched investment-linked (ILP) type of insurance policies, which were a special type of insurance policies that invested into unit trusts. Most of the time, the charges were also high as they were mainly embedded within the plans.

When the internet came about, online platforms emerged as another avenue for retail investors to purchase unit trusts. Without a physical presence, these platforms could afford to have a lower sales charge and compete on price and convenience.

How many of you here actually remember FinatiQ, Singapore’s first online bank?

It offered very competitive savings and fixed deposit interest rates. One could also buy unit trusts through the platform at a lower sales charge of 2-3%. Unfortunately, due to a loss in marketing and platform direction, Finatiq decided to cease operations a few years back.

Two other early online platforms offering unit trusts were Fundsupermart (FSM) and Dollardex. DIY investors who dabble into unit trusts would be familiar with them. Shortly after they came out, retail investors were able to buy unit trusts at a much reduced upfront sales charge of only 1.5-2%.

Due to their advantage as early adopters and low pricing strategy, they held a high market share among the DIY investors.

Despite this, the banks still controlled a significant portion of the unit trust market as they were able to rely on their vast network of bank branches and customer base to move sales. All these while continuing to maintain their 5% sales charge margin as many consumers were not aware of better alternatives.

A later entrant to the online unit trust industry was Phillip Unit Trust, a member of PhillipCapital. Their online platform POEMS is actually widely known to most retail investors as a share trading platform. POEMS, in actual fact, has one of the biggest market share when it comes to the retail market for share trading.

By offering unit trusts on their platform, PhillipCapital allowed their customers to use a single platform for buying both shares and unit trusts (among other products). For people who do not want the hassle of having multiple platforms, POEMS serves as a good option.

One key difference between POEMs and the other two platforms is that the payment for unit trusts need not be received first in order for the order to be transacted. For both FSM and Dollardex, they have to receive your money first before they can process your online order. For POEMS, they operate similarly to how they clear your stock orders. Clear the trade on the same day, and allow you to pay later.

Of course, should you choose to park your money beforehand at POEMS, they will be placed into the Phillip Money Market Fund, which has returned a respectable 0.56% return for the past one year.

With three main players now (FSM, Dollardex and POEMS), investors are basically spoilt for choice when it comes to choosing a platform. The price war among the three has been relentless and this can only benefit consumers.

However, with huge pressures depressing the upfront commissions, platforms can only make money from the trailer fees or find some other way to generate revenue.

Fundsupermart was the first to bite the bullet and started to impose a platform fee a couple of years ago. The platform fee ranges from 0.2% to 0.5% per year (depending on your account size and type of fund). There are no platform fees for CPF holdings.

Navigator, the engine behind Dollardex, also followed suit by imposing a platform fee on accounts held via financial advisers. This does not apply to accounts at Dollardex although Dollardex does have an option where you can choose to play an annual fee in return for portfolio advice and unlimited free switching.

The platform fee can be a significant factor for cost conscious investors who do not want their portfolio’s returns to be affected by an addition layer of costs. Of course, there are those who might argue that in the first place, paying the annual management fee to the fund managers does not guarantee performance and we should just invest into ETFs or equities directly. That is another topic for discussion which I shall not cover in this article.

However, one thing is definitely clear. As consumers become more educated and conscious about fees, buying unit trusts through banks is going to be a thing of the past. This is even more so for CPF investments, as the CPF agent bank’s fees are much lower if you go through one of the three highlighted platforms compared to buying them from the banks or elsewhere.

Banks will have to develop their own online low cost platforms or some other strategy if they wish to compete. This is already happening.

To leave your comments, please go to : Unit Trust Platforms in Singapore

For Dollardex, they now have a list of 30+ bond funds that does not have any upfront sales charge. Currently, their private+ clients (those with more than $200k in assets invested) already enjoy 0% sales charge for all their CPF investments.

Similarly, Fundsupermart (FSM) now have a list of around 50 fixed income funds that will not have any upfront sales charge. FSM announced this move through a new portal Where Income and Savings are Enhanced (WISE), which also provided some educational materials on bond funds.

You might ask the question, so what exactly do the platforms earn if they do not impose any upfront sales charge?

In case you were not aware, a part of the annual management fees for the funds are actually paid to the distributor as trailer fee. This can add up if the assets are huge.

FSM also has an annual platform fee of 0.2% for bond funds held on their platform.

With increasing client sophistication, the days of paying a high sales charge through a third party distributor might very soon be a thing of the past.

To leave your comments, please go to : Zero Sales Charge for Bond Funds

From 1 February 2011 to 31 March 2011, all funds purchased at dollarDEX under CPFIS will be at 0% sales charge. This promotional price excludes switching and is for new investments only. Their normal sales charge is 2%.

Gone are the days when distribution of funds were monopolised by banks and consumers pay a sales charge of 5%.

To leave your comments, please go to : Zero Percent Sales Charge Offer for CPFIS Funds

This comes a few days after they conducted a poll to ask whether the current 3% cap on sales charge of CPFIS is reasonable.

Competition is getting intense with front end load on unit trusts having come down much over the years. Both Dollardex and Fundsupermart (FMS) are now locked in a fierce battle to grow and maintain their market share while trying to maintain a lid on their costs.

Consumers are smart and will vote with their feet to wherever they can find the best price and value.

To leave your comments, please go to : Dollardex Sales Charge Promotion for CPFIS

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.

To leave your comments, please go to : Fundsupermart to Impose Platform Fees