One of the first steps to Singaporeans’ investment journey is the task of choosing from the many brokerage houses in Singapore to open a stock brokerage account with.
Along with fees, which is a key consideration when it comes to choosing a brokerage house, here are other factors investors should also be considering.
When buying and selling stocks, there are 3 main types of fees we incur:
- Clearing fee of 0.0325% of your contract value is imposed by the Central Depository (CDP)
- Trading fee of 0.0075% of your contract value is imposed by the SGX
- Commission fee (and other fees) imposed by individual brokerage accounts when transactions are made
There is also a minimum commission fee put in place that ranges from $10 (for custodian accounts) to $25 (for CDP-linked accounts). The trading fees incurred also depends on your trade size and whether the stocks are credited to your CDP account. The fees also differ when you trade on overseas markets from market to market.
#2 Market Access
Not all brokerage houses provide access to all financial markets globally. Besides SGX, most of the brokerage houses in Singapore allow us to invest in the Hong Kong Exchange (HKEX), NASDAQ, New York Stock Exchange (NYSE) and American Stock Exchange (AMEX).
However, if you are looking to invest in countries such as Australia (ASX), Japan (TSE), London (LSE), Switzerland (SIX Swiss Exchange) and more, you need to choose a broker that provides you with that option to invest in those specific markets.
Also check whether the access to those markets offered is online or offline trading. Online trading allows you to execute trades yourself on the online platform. Offline trading requires you to make your orders through a broker and the broker will execute the trade for you. This is also why fees for offline trading is higher than the fees for online trading.
#3 Investment Insights
When you open your brokerage account through the brokerage platform directly, you will be randomly assigned a broker. You can also choose to sign up with a broker that you know or get recommended to.
The broker from the brokerage house matters as they can provide support with market updates, insights and experience. They are also the person that you can trust to execute your trades if need be.
Some brokers provide their own investment insights and opinion as an extra, value-adding service. Many of them also promise a quick response time to ensure that you are getting the best support possible.
#4 Company Materials And Events
The brokerage account you choose also provides you access to the company’s analyst reports and market updates. Some brokerage houses also provide educational materials, seminars and events for their clients.
For example, Phillip Capital’s provides a morning note that contains a research report, top active stocks, the latest news in the market and more. They also provide a weekly webinar for their clients to ask questions on their coverage as well as the market direction.
#5 Product Access
Are you looking to purchase Stocks, Unit Trusts, Exchange Traded Funds (ETFs), CFDs, Futures, Options or Bonds etc.?
The product you wish to purchase should be a key consideration when choosing your brokerage house. Not all brokerage houses offer all products.
For example, not all brokerage houses offer monthly investment plans for their users. Monthly investment plans are currently offered by 4 providers in Singapore, namely:
- DBS/POSB Invest-Saver
- OCBC Blue Chip Investment Plan (BCIP)
- Maybank Kim Eng Monthly Investment Plan
- Phillip Share Builders Plan
#6 Additional Perks
Does using a particular brokerage house’s account give you any additional perks?
For example, DBS Multiplier account holders have to use a DBS Vickers account for their “BUY” trades to be counted under the investment transaction component of the DBS Multiplier account. This means that trades done with other brokerage houses will not count towards their investment transaction component. This incentivizes DBS Multiplier account holders to open and use their DBS Vickers account.
#7 Platform Experience
The user interface differs from platform to platform. A brokerage’s web and mobile layout also plays a part in determining the user experience.
Does the platform provide tools that suit your requirements? Is the platform user-friendly and easy to navigate?
You might develop a preference for one brokerage platform simply because their user interface looks visually appealing and suits your style of usage.
#8 CDP-Linked Account or Custodian Account
Most brokerage houses offer CDP-linked brokerage accounts that allow you to hold your stocks with the CDP. Custodian accounts on the other hand, do not deposit the shares into your CDP account. Custodian accounts are managed by the brokerage house rather than the SGX, holding your shares under their custody. Custodian accounts are also necessary when investing in overseas markets.
While custodian accounts are able to charge lower commission rates, there are other fees to take into consideration such as transfer charges and custody maintenance fees.
When it comes to brokerage accounts, you do not need to stick to one broker. You can open multiple brokerage accounts with different brokerage houses to try them out before deciding on the account you prefer to use as your main account.
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