Heartland Boy has received a few enquiries from readers on the stock brokerage company that he uses to purchase and sell his shares in Singapore. For the uninitiated, a stock brokerage firm allows you to buy and sell shares on the stock market. For providing this service, brokerage companies charge a commission fee for each transaction that the customer makes. To improve your returns from the stock market, aside from the obvious actual performance of your stocks, it is just as important to pay attention to your transaction expenses.
When Heartland Boy first started investing, he was using established stock brokerage accounts such as DBS Vickers and POEMS. However, this all changed when the topic of investment came up during one of those dates that Heartland Boy and Heartland Girl had. Heartland Girl shared that she was using the Standard Chartered Online Equities Trading Account and how its commission fees was the lowest. Since that fateful day, Heartland Boy opened a stock brokerage account with Standard Chartered and became a convert. He is a satisfied customer who would like to provide a positive review of Standard Chartered’s online brokerage platform and why he thinks Standard Chartered Brokerage is the cheapest brokerage with the lowest trading fees in Singapore.
Advantage of Using Standard Chartered Brokerage
Standard Chartered Is The Cheapest Brokerage In Singapore
As Heartland Boy adopts a stock selection strategy known as Value Momentum (made famous by Adam Khoo), he may commit more transactions than the typical “buy and hold” value investor. Further, given that his investment size is relatively small, he could ill afford to allow minimum commission fees to form a significant percentage of his transaction costs. Therefore, given its low commission fees, Heartland Boy made the switch to Standard Chartered Online Equities Account in a heartbeat.
Despite recently increasing its minimum fee from zero to $10, Standard Chartered online brokerage is still the cheapest brokerage in Singapore! Standard Chartered brokerage levies a minimum commission of $10 or a flat commission fee of 0.2% of the transaction value, whichever is higher. This is significantly lower than the commissions levied by POEMS and DBS Vickers. (both charge a minimum commission of $25 or a flat brokerage fee of 0.28% of transaction value) Note that it can be even lower as the minimum commission fee of $10 does not apply if you happen to be a Priority Banking customer with Standard Chartered. Unfortunately, Heartland Boy does not have an Asset Under Management (‘AUM’) of S$250,000.
To illustrate the value proposition of Standard Chartered brokerage, it is best to compare the brokerage fees involved in a hypothetical scenario whereby Heartland Boy attempts to purchase 10,000 shares of Dutech.
*The $1.96 shown reflects standard market fees which consists of SGX Clearing Fee (0.0325%) and SGX Trading Access Fee (0.0075%). These are applicable as long as the stocks are listed in SGX.
As shown in the 2 diagrams above, for the same purchase, the cost incurred using the Standard Chartered Online Equities Trading Account is $11.96 while the cost incurred on DBS Vickers is $28.85. The transaction expenses are 0.24% and 0.59% respectively. Multiply it by 2 would give you the total transaction cost of buying and selling the stock. Therefore, for this purchase of Dutech, Heartland Boy would be in the money as long as Dutech returns more than 0.48% during his holding period. This will not be the case if he had not purchase his stocks via the Standard Chartered online account.
Disadvantages of Using Standard Chartered Brokerage
1. Standard Chartered Brokerage Does Not Deposit Your Shares In Central Depository Account
So here is the catch, the reason why Standard Chartered is able to offer such a low commission fee compared to its competitors is because the shares that you purchase are not deposited into the Central Depository Account*. (‘CDP’)
*Note that CDP charges a fee to these brokerages for keeping the stocks with CDP.
For Standard Chartered brokerage, the shares that you purchase are held in a custodian account under Standard Chartered Bank. Therefore, the CDP is bypassed in this process, and along with it, the fees associated with using a CDP.
Of course, it will be good to have your shares deposited into the CDP since the share certificates are under your name. Nothing feels better to have a share certificate or a land title bearing your own name. Moreover, the CDP is backed by SGX. As a custodian of your shares, it may also mean that you could miss out on important events such as Annual General Meetings or voting at Extraordinary General Meetings. Heartland Boy managed to get around this by applying with Standard Chartered at the earliest notice of such corporate events. This was how he managed to attend QAF’s AGM and ask the directors some burning questions.
However, readers should note that the custodian arrangement is not something peculiar as all other brokerages would also deposit the shares that you have purchased from overseas bourses into their respective custodian accounts. The CDP is simply a uniquely Singapore (SGX) phenomenon. Since the custodian arrangement is common, the only risk that remains is the counterparty risk. In the unlikely event that Standard Chartered closes shop, it states that the shares will be returned to the client or will be transferred to another brokerage of the client’s choice. In addition, Standard Chartered is a online trading platform and it does not provide brokers.
2. No Charting Tools On Standard Chartered Online Trading Account
Another disadvantage is the lack of charting tools on Standard Chartered Online Equities Trading Account. Obviously, there is a cost to providing such services, and as a low-cost service provider, Standard Chartered brokerage has removed these fanciful charts. It is no different from paying a lower fee on a budget airline only to find that your fee does not cover food and entertainment.
Since Heartland Boy practices value momentum, having charting tools such as moving averages are very important to him. To get around the lack of charting tools on Standard Chartered brokerage, he simply uses the free charting tools provided by the other brokerages that he still maintains. Other free resources are social investing platforms such as InvestingNote. In this manner, he gets to enjoy the best of both worlds!
3. Standard Chartered Account Is Not linked To SRS Or CPFIS
Since the shares that you purchase are not deposited into CDP, Standard Chartered Equities Account is obviously not compatible with CPFIS or SRS. Therefore, if you have excess money sitting in the CPF or SRS, you would have to open a brokerage account with one of the 3 local banks. Yes, Heartland Boy would encourage you to go through this hassle, since he is an advocate of using your SRS for long-term investment and retirement planning.
Conclusion Of Standard Chartered Brokerage
Readers can tell that Standard Chartered Brokerage only stands out for one advantage- charging the lowest commission fees in Singapore. But this is a reason so strong that it has compelled Heartland Boy to overlook the rest of the disadvantages. But do take note that a more pertinent question is how much counterparty risk are you willing to bear for low fees?
Hey, do you know that Standard Chartered Bank also provides one of the best cash back credit cards in Singapore? Read more about it in Heartland Boy’s review.[Note: This article was published in 2016 before the advent of ultra low-cost online brokerages such as CityIndex, Tiger Brokers and moomoo. If you want to know how these ultra low-cost online brokerages fare, check out my article comparing their pros and cons here.]