In the past few years, the Financial Technology (FinTech) space in Singapore continues to be heating up. Consumers are no longer restricted to plain vanilla methods of investing for example buying stocks and bonds from the stock exchange or choosing from only unit trusts or investment-linked plans (ILPs) in the banks they save with. Some consumers could want to try out new ways of investing such as Robo-Advisors who use only easily accessible ETFs, or invest in loans through P2P lending platforms for example Funding Societies.
Clearly, the FinTech revolution in Singapore is here now to stay, but it requires investors to know the investment products that they intend to use. With greater options come greater responsibility. It is just through understanding the various investment products that investors can truly get the best decision for themselves.
But so far there's been a lack of access to a holistic and diversified method of investing, and there is space for further innovation in this area of wealth management (or what is known as WealthTech). This is where Endowus is trying to change the industry with a new approach to a conventional way of investing by focusing on the most important part – financial advice.
Endowus, A good investment Platform That Offers Access To Best-In-Class Funds At Low Cost
Endowus is really a FinTech platform that aims to help Singaporeans grow their wealth by investing systematically. The woking platform is independently owned and operated by experienced investment professionals who struggled to find efficient ways to invest their very own savings in Singapore. With their institutional backgrounds, they wondered whether they could create a platform by which all Singaporean investors can invest efficiently such as the major institutions such as university endowments, sovereign wealth funds, and the GICs of this world.
The investment team is led by Samuel Rhee, a skilled investor, and 24-year industry veteran. He is the former CEO and Chief Investment Officer of Morgan Stanley Investment Management in Asia, managing approximately US$15 billion in assets for institutional clients. His expertise includes macro analysis, asset allocation, portfolio construction, and optimization. There's deep financial and technology domain knowledge within the team, and other founding team members have worked at both major global financial institutions and tech companies for example Goldman Sachs, Morgan Stanley, UBS, Blackstone, Nomura, HSBC, Zalora, Carousell, and Grab.
Endowus is an MAS-licensed financial adviser. It is also an independent, fee-only firm. This means that Endowus is just paid by its clients (i.e. the investors) and never by any product providers, which allows them to independently choose the best investment products available that are the most suitable to their clients. They charge an all-in-one Access Fee, which includes advice, portfolio service, investment, rebalancing, transfers and brokerage services, as well as access to some of the best-in-class funds all over the world. Endowus does not charge any sales fee or receive any trailer fees or rebates from the funds that they work with. Furthermore, Endowus is not paid on a transaction-basis and therefore doesn't have an incentive to push its clients to trade and churn their accounts.
How Does Endowus Work?
Endowus believes inside a systematic and evidence-based approach to investing. Underpinning their belief is Nobel Laureate Eugene Fama's decades of labor on asset pricing which deals with the power of markets, understanding that the marketplace price efficiently reflects all available information. In equities, you ought to focus their efforts on building>
CPF & SRS Investments
All-in-one Access Fee reaches 0.40% p.a for both CPF investments and SRS investments.
These fees aren't inclusive of the fund management fees that are charged at the fund level. Based on Endowus, the fund-level fees for its portfolios are in institutional levels ranging from 0.50% to 0.56% per year, which is significantly lower than typical retail fund charges.
In other words, by using Endowus and the funds which it invests in, investors will pay a total fee of between 0.75% to at least one.16% per annum including advice, utilisation of the platform, brokerage, transfers, and fund-level fees. This comes even close to all-in fees for retail investors which can be around 4-6%. Retail share-class funds typically charge fund-level fees of just one.6~2.0%, of which half is removed from your investments without you knowing it and paid to the distributor normally in the form of rebates. There are upfront sales charges of two.00-3.00%, and other distributors or fund platforms could also have additional charges including platform/wrap fees (0.50%-1.00%) and transaction charges (0.25%-0.50%). The total burden to the normal investor is exorbitant and weighs on returns. This is why the most powerful predictor of future returns is actually the cost of fees. Higher fees lead to meaningfully lower returns in the future and vice versa.
Do note that based on our observation, the ESG funds generally have higher fund management fees that may be more than 1%. Thus the ESG portfolios would likely cost more in term
Endowus Wants To Remove A large, Inherent Conflict Of Interest Situation
One of the most popular value propositions, in our opinion, is that Endowus solves the inherent conflict of interest situation where fund distributors (e.g. your broker/financial adviser) are taking a distribution commission in the funds that they sell you as an investor. This fee is known as a trailer fee. You can read much more about what trailer fees have been in this article.
Trailer fees are typically between 0.5% to at least one.0%, and this could be more than 1 / 2 of the fund-level fee. In other words, it's possible that of the 1.80% fund management fee that you're paying for your unit trusts today, over 0.90% from the fee is actually going to the financial adviser who sold the unit trust on a recurring basis.
Most retail investors do not know of this trailer fee, as it's already included as part of the fund management fee and brought out of the NAV. However, it is important for investors to realise this creates a natural conflict of great interest situation, since the fund distributors are generating an ongoing fee from each one of the funds that they are selling to you.
Endowus doesn't accept trailer fees. This makes their financial advice completely independent as they are not receiving any fee in the funds they recommend. As said before, investors pay an Access Fee to Endowus directly (0.6% or lower) and a fund-level fee (0.50% to 0.56%) to the fund managers.
What Does Endowus Offer For Investors In Singapore?
Firstly, Endowus provides sophisticated advice in investing, that is much needed in Singapore. They build holistic and globally diversified portfolios personalised for your risk profile, and deliver it inside a seamless digital experience, thus satisfying the necessity of the modern investor through a great customer experience.
Secondly, Endowus provides use of some of the leading investment funds around the world managed by top fund managers, which are not readily available to retail investors. These money is able to charge low management fees of between 0.50 to 0.56% because they do not pay trailer fees to their distributors and Endowus can connect to the institutional share classes.
Thirdly, Endowus helps investors find the right global funds that they should be investing in. Endowus also helps investors actively monitor and manage their asset allocation, rebalancing their portfolios when needed. This ensures that the client's portfolio remains as in-line with their objectives and risk tolerance over a long investment period.
Last but certainly not least, Endowus does not accept any trailer fees in the funds it distributes. So although it does partner with global fund management the likes of Dimensional and PIMCO, it does not earn any revenue or commission from these companies. The only fee it earns is a transparent and aligned all-in-one Access Fee from its investors.
Invest Better With Endowus
If you’re interested to begin investing with Endowus, you’ll gladly know that DollarsAndSense readers can have their first $10,000 managed free of charge for 6 months, which means savings of $20 in fees. Sign-up using this link to claim this special offer. Terms & Conditions apply.