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How to Decide Which Investment Brokerage in Singapore Is Best For You

How to Decide which Investment Brokerage in Singapore is Best for You

Let me guess. You’re fresh out of university, raring to start your career, and you think you’re financially savvy enough to dabble in stocks and shares. You’re ready to rake it in — but then you start checking out DBS Vickers, UOB Kay Hian, POEMS… and realise that there are an overwhelming number of options when it comes to investment brokerage firms in Singapore.

So how do you decide which investment brokerage is best for you?

Well, it takes careful consideration of several factors like the commission fees, trading platform and account type. We urge you to pick wisely: It could make all the difference between whether you’re just breaking even or if you’re actually going to make money from your adventure on the stock market.

Here are 3 main factors you need to look out for when choosing the best brokerage firm for you:

 

1. How much is the commission? Comparison of investment brokerage fees

Investment brokerage firms allow you to buy and sell shares on the stock market, and they charge commission fees for each transaction you make. When you buy shares, you get charged. When you sell shares, you also get charged. That’s why it’s always important to find out how much commission fee a brokerage firm charges you.

Here’s a list of the more popular brokerage firms in Singapore and their fees for small-time investors (up to $50,000 in investments; it’s usually cheaper for larger amounts).

Investment Brokerage Firm Trading Fee (up to $50K) Minimum Fee Custodian or CDP?
SAXO Markets 0.08% $10 Custodian
Maybank Kim Eng (prepaid) 0.12% $10 Custodian
Phillip Securities (POEMS) (prepaid) 0.12% $10 Custodian
UOB KayHian (prepaid) 0.12% $10 Custodian
CGS-CIMB Securities (prepaid) 0.18% $18 Custodian
Standard Chartered 0.2% $10 Custodian
Citibank 0.25% $28 CDP
CGS-CIMB Securities 0.275% $25 CDP
KGI Securities (formerly AmFraser) 0.275% $25 CDP
Maybank Kim Eng 0.275%  $25 CDP
OCBC Securities 0.275% $25 CDP
RHB Securities (formerly DMG) 0.275% $25 CDP
UOB KayHian 0.275% $25 CDP
DBS Vickers 0.28% $25 CDP
Lim & Tan Securities 0.28% $25 CDP
Phillip Securities (POEMS) 0.28% $25 CDP

All trading fees listed are based on online/mobile trades done in the Singapore market. They exclude other charges like the clearing fee, SGX trading fee and GST.

You can also compare online investment brokerages at our MoneySmart page.

If you’re the kind of investor to just “park” your money and not think twice about it, commission fees won’t make much of a difference to you. But most investors want to buy low and sell high, and so should expect to be charged commission fees multiple times. If this is you, then it is more important to pick one that charges affordable rates.

Depending on how much you’re planning to invest, you could also be caught by the minimum fees. This refers to the minimum commission charged, regardless of how little you’re trading. If you’re a regular small-time investor trading in $1,000s rather than $10,000s, it might not even matter how much the commission fee is by percentage — you would be more interested in choosing a broker with the lowest minimum fee instead.

In general, the lower the transaction amount, the more expensive the commission. For small-time investors, you should be trading at least $10,000 per transaction if you want to avoid paying the minimum fee, which will end up being a much higher percentage of your trade than if you were to trade higher.

Of course, while fees are an important consideration, they should not be your only deciding factor…

Brokerage fees

 

2. What’s this “prepaid” thing all about? The significance of CDP account vs custodian account

It’s glaringly obvious that the investment brokerages offering the lower fees fall under the “custodian” category in the 4th column of the table.

It also looks like some of Singapore’s more traditional investment brokers, like POEMS and Maybank, are now offering a cheaper commission fee if you opt for a “prepaid” or “prefunded” account. What gives!?

Well, it turns out that a growing number of investment brokers are feeling the heat from online brokerages like SAXO Markets, who are able to offer way cheaper commission fees.

As a result, they are now offering competitive “prepaid” rates, which you can enjoy if you pre-deposit cash into your trading account. Your trades will be limited to your account balance, so you have to keep this account funded if you want to continuously trade.

Importantly, these prefunded accounts also mean that your stocks are held in a custodian account instead of the usual CDP account.

This is in contrast to the CDP (Central Depository) account model normally offered. What this means is that while you buy and sell stocks through investment firms, the stocks themselves are held by you, via your CDP account. We’ll talk more on how to open a CDP account later.

Investing through the non-CDP route, on the other hand, means that the custodian account (e.g. SAXO) owns the stocks on your behalf. So you may not have the full shareholder rights to your stocks, such as attending AGMs or voting rights.

Furthermore, on the very slim chance that the investment brokerage firm goes bankrupt, you may have trouble regaining your stocks because they are technically not in your name.

Most brokerages assure clients that custodian accounts are kept separate and will not be affected should the company be insolvent or go into liquidation. But still, there’s a slightly higher risk compared to owning the stocks directly.

TL;DR: CDP = higher commission fees, but you own the shares directly. Custodian account = cheaper fees, but shares are not in your name.

 

3. What is the investment brokerage’s trading platform like?

In the past, many trades required investors to call their brokers and deal with them directly. Furthermore, they had to rely on stock prices and other information that may not be updated instantaneously. Those days are long gone.

Brokerage firms these days offer online trading platforms that allow you to check stock prices and make trades on the go. Some even have mobile apps.

Naturally, you would want to pick an investment broker with an accessible and user-friendly online trading platform. If you can’t trade online with ease, then what is even the point? Might as well join the line at Phillip Capital. Plus, the commission fees for online trading are usually a lot cheaper than traditional offline trading.

Before you commit to a specific investment broker, make sure you test out their platform to see if it’s something you’d be happy using time and again. If it’s buggy, doesn’t display the right information, and doesn’t have the tools that you need — forget it, there are other fish in the sea.

On the other hand, a too-user-friendly online platform might also bring out the worst in us. Make sure you don’t become addicted to watching stock prices going up and down and getting all kinds of stressed — we already have social media for that.

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Choosing a Brokerage Account

 

In case you need it: Here’s how to open a CDP Account

If you have decided on an investment brokerage that lets you own stocks via CDP, then you’ll need to set up a CDP securities account.

To be eligible to open an account, you need to be at least 18 years old and NOT an un-discharged bankrupt. You can either do this directly with The Central Depository (it’s a very straightforward process) or create a sub-account with a “Depository Agent” – a stockbroking firm, trust company or bank nominee.

Basically, while you can deal with as many different brokerage firms as you want, you only need to open one CDP securities account to deposit all the stocks you’ve bought.

Opening a CDP account

 

Bonus: Investment brokerage fees for US stock market

Apart from letting you buy and sell shares on SGX, all the investment brokerages we talked about also extend the same services in major overseas stock exchanges. So if you’re looking to invest in overseas stock markets in the future, it’s worthwhile to check your broker’s commission fees for them.

Commission fees and minimums are different for each stock market, so I’m going to pick out just the fees for US stock markets (typically you can trade on NYSE and NASDAQ, sometimes AMEX too):

Investment Brokerage Firm Trading Fee (up to $50K) Minimum Fee
SAXO Markets 0.06% US$4
CGS-CIMB Securities (prepaid) 0.18% US$18
UOB Kay Hian (prepaid) 0.18% US$20
DBS Vickers 0.18% US$25
Standard Chartered 0.25% S$10
Maybank Kim Eng 0.3% US$20
Phillip Securities (POEMS) 0.3% US$20
KGI Securities (formerly AmFraser) 0.3% US$20
OCBC Securities 0.3% US$20
RHB Securities (formerly DMG) 0.3% US$20
Lim & Tan Securities 0.3% US$20
Citibank 0.3% US$25

If you’re trading in overseas stock markets, note that the whole CDP vs custodian account thing doesn’t matter. The Central Depository is only for trades on SGX, and is not an option if you’re buying, say, Amazon stock or an S&P 500 ETF on a US exchange. Your stocks will be held in a custodian account by default.

In addition to these commission fees, be aware of additional fees which vary from market to market. For example, in the US there is an SEC fee for selling shares, while different taxes or foreign exchange fees may apply elsewhere.

Do you have any other advice for new investors who want to try out a brokerage firm? We want to hear from you.

 

Related articles

CDP Account Singapore – How On Earth Do You Open An SGX CDP Account?

Investing in Shares (2019) – MoneySmart Guide to Buying SGX Stocks

REITs in Singapore (2019) – MoneySmart Guide to Investing in REITs

Robo Advisors In Singapore – Is This Approach to Investments Right for You?

DBS Vickers — The Total Beginner’s Guide to DBS Investment Platform

UOB Kay Hian / UTRADE — A Beginner’s Guide to UOB Investment Platform 

OCBC Securities – A Beginner’s Guide to OCBC’s Investment Platform

POEMS: Phillip Capital Investment Brokerage Tool Review

Saxo Markets (Singapore) Investment Brokerage Review: How to Invest Using SaxoTraderGO?

 

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