Unit trust fees slashed to woo investors
DBS, Fundsupermart among those which now charge just 1%
By Sylvia Paik(Taken from the Straits Times on 19th December 2009)
A PRICE war seems to have broken out in the unit trust industry in Singapore, with at least three fund distributors now slashing their sales charges to just 1 per cent.
DBS Bank started the ball rolling in early October when it cut its sales charge on all unit trusts to 1 per cent - a move the bank says has already resulted in a two-fold increase in unit trust sales.
Last Tuesday, online fund distributor Fundsupermart.com reduced its sales charge for its 11 best performing funds over a period of three years to 1 per cent.
And The Straits Times has learnt that even though it has not advertised this, Standard Chartered Bank (Stanchart) is also offering a 1 per cent sales charge to selected customers quietly.
Unit trusts are typically sold by banks, insurers, stockbrokers and other independent financial advisers.
These distributors levy an upfront sales charge, which is deducted straightaway from the principal amount an investor puts into a unit trust.
The traditional sales charge in a face-to-face transaction with a customer is usually 5 per cent, but this has been bettered in recent years by a host of cheaper online distributors.
Most online distributors charge between 1.5 per cent and 2.5 per cent, with some going as low as 1 per cent if the customer invests a large amount of money.
At a flat 1 per cent for any investment amount, the three distributors are undercutting the competition significantly.
Mr Jeremy Soo, DBS' managing director and head of consumer banking in Singapore, said the bank slashed the upfront sales to 'give customers greater value for their investments'.
'As part of our continuous efforts to demonstrate product transparency and suitability, and to give customers greater peace of mind when investing, DBS also began offering customers 14 days to review their unit trust investment decisions - seven days more than the industry standard,' he said.
Both initiatives have been well-received by customers, Mr Soo said.
At Fundsupermart, unit trust sales are up 34 per cent since the 1 per cent sales charge was introduced. Its general manager, Mr Wong Sui Jau, said its latest promotion was not a response to DBS' price cuts.
'We have always had ad hoc promotions on and off on a regular basis, and we usually base our promotions on certain themes which are often related to our research outlook,' he said.
Stanchart, a top fund distributor here, continues to charge a sales fee of 'up to 5 per cent', said its spokesman. But The Straits Times understands that the sales charge has been reduced to 1 per cent for some customers.
In response to queries, Ms Janice Poon, who is head of the bank's advisory and segment strategy in Singapore and Malaysia, would only say that the bank reviews its fees and charges periodically.
'Currently, there is no change to our unit trust sales charges. We continue to see a healthy demand for our unit trust products,' she said.
OCBC Bank's head of wealth management in Singapore, Mr Lim Wyson, also said the bank maintains its unit trust sales charges at 'competitive levels'. It charges up to 5 per cent at its branches, but fees are lower - about 2 per cent to 3 per cent - on its online portal finatiq.com.
But cost is not the only factor in selling these investments, Mr Lim cautioned.
'We believe that customers look at factors beyond price, such as their investment strategies, past performance of the fund, track record of the fund manager, among others.'
Some seasoned unit trust investors told The Straits Times the reduced rates do make a big difference.
Mr K. Yong, who has had more than $300,000 invested in unit trusts, said: 'Basically, the unit trust distributors will all give financial advice, but we will look for the cheapest sales charge for the same unit trust.
'I am also considering other options like exchange traded funds, which are more cost-efficient as I do not need to incur any sales charges.'
But others maintained that they are willing to pay higher sales charges if their financial planners provide sound advice.
'Basically, I buy whatever my financial planner recommends, and the sales charge doesn't really bother me,' said Mr S. Cheng, who buys unit trusts for retirement planning.
sylviap@sph.com.sg
Sunday, December 20
Unit trust fees slashed to woo investors
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Sunday, December 20, 2009
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Hi recently I opted for few
ReplyDeleteunit trusts schemes available at DBS bank. I took this decision since they have slashed fees. Now I look forward to have better returns on this investment in near future.
Hi Jessica,
ReplyDeleteThe lower sales charge is indeed a welcoming move as this means more of your capital can be invested. In my opinion though, the sales charge for unit trusts along with the fund management fees are still significant higher than ETFs.
Kay
Great scope on things.
ReplyDelete