One of the best thing that had happened to CPF investing is the introduction of the ‘IA’ status in Fundsupermart (FSM).
FSM is an online financial portal selling unit trusts in Singapore. While many online sites claim to provide value, passing lower cost to customer, FSM stood out as one that provide value by way of using technology innovatively and coming out with revolutionary new services.
The ‘IA’ status basically refers to CPFIS registered Investment Administrator (IA) status. With this, Fundsupermart can draw monies directly from CPF agent bank when buying unit trust using CPF.
Take a look at this flow chart from Fundsupermart.
Of course if that is all they did, nothing great. But read this.
Summary of Agent Bank Charges
| Type of transaction | Before 1 March 2005 | From 1 March 2005 |
| Per buy transaction | *$2.50 per 1,000 units or part thereof subject to a maximum of $25 per fund | $2.50 regardless of number of units and number of funds |
| Per sell transaction | *$2.50 per 1,000 units or part thereof subject to a maximum of $25 per fund | $2.50 regardless of number of units and number of funds |
| Per fund switch (This involves a sell transaction followed by a buy transaction) | Sell: *$2.50 per 1,000 units or part thereof subject to a maximum of $25 per fund+
Buy: *$2.50 per 1,000 units or part thereof subject to a maximum of $25 per fund |
No agent bank charges incurred whatsoever |
| Quarterly service charge | *$2.00 per fund | $2.00 regardless of number of funds |
"From 1 March 2005" refers to when the AI status comes into effect.
The banks must be hating them for doing this. High-five for consumer victory!
I always puzzled why banks setup charges like above. I can understand (with objection) if the charge is based on the transaction amount, but why based the charge on the number of units?
Just look at the same investment of $10,000 on unit of $1 and $10. The difference is staggering! The bank charges are $25 and $2.50 respectively. And the unit price has no bearing on the fund performance whatsoever.
This is one of those charges which I labelled as "We charge because we can and there is nothing you can do about it. Use it or leave it". Stinking smell on monopolistic profit-seeking-at-expense-of-consumer company.
What is the incremental cost difference to the bank for processing a $1,000 and a $100,000 unit trust buy/sell? Probably zero, since bytes of one and zero just pass through the system with any intervention.
Kudos to Fundsupermart who really gets it. May they continue to succeed by championing and delivering values for consumers.
Unfortunately, to switch to the ‘IA’ status would first require selling the existing
funds which attracts the bank’s selling charges and the fund’s sales charge.
A quick calculation on an Excel spreadsheet (download spreadsheet) shows that it is not worthwhile to switch if taking into account the fund’s sales charge. Since to switch, the fund has to be first sold and brought again at the market price with it corresponding sales charge. With sales charges averaging about 2.5% it would wipe out any saving.
For more information, refer also to IFAST Financial is a CPFIS Registered Investment Administrator (IA).
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