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Best Local Broker for A Sizeable Account (For Buying Foreign ETFs)

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Old 20-03-2019, 10:35 PM   #1
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Best Local Broker for A Sizeable Account (For Buying Foreign ETFs)

Hello experts,

Am here to seek advice.

A little background about myself. I'm 40 yo. A newbie and a buy-and-hold-forever investor (will do periodical rebalancing). I have been DCA'ing into SGX (STI ETF + REITs) since last year. I used POEMS for that, but will switch to DBSV Cash Upfront (0.12% comm). Stocks are kept in CDP. All that is good.

Now, I am planning to gain exposure to the global market, with around $1M in the next few years . I plan to buy VWRD (Vanguard FTSE All World, distributing) on LSE. Maybe will allocate a small portion to 3188:HK (CSI 300 ETF), but not decided yet. A big issue I am having is deciding the best broker for my use case.

I read that IBKR is the best cost-wise (low comm and small spread), but I have to dismiss it for the following reasons:
  • IBKR is a US-based broker. Cash balance above US$60k is subject to US estate tax. As I plan to keep the portfolio till old age, there's a possibility that I may lose the ability to manage the account (think Dementia or plain too old) and it gets neglected. Dividends will keep flowing in and exceed the US$60k threshold.
  • I don't feel safe dealing with a broker with no local presence. When it's time for my successors to inherit this portfolio, I want the process to be hassle and risk free. Using a foreign broker increases the risk of complications (eg. unwarranted tax, complicated process?), and the cost for recourse will be high, not to mention the time and hassle involved.

I am willing to pay a small price to use a local broker for the peace of mind. Initially I planned to use DBSV. And, I learnt about DBS Treasures, but found it to be expensive in the long run despite lower comm. I did not consider SCB initially (was leaning towards "true" local banks/brokers), but SCB appears to be the most sensible choice for me now.

Assuming I build a $1m portfolio in the next few years and hold it for 40 years. Below shows my Excel calculations. For simplicity, I am omitting the cost of rebalancing. As only a small portion of portfolio needs to be rebalanced, I guess that may increase the comm amount by 10% at most...

VWRD capital : $1,000,000
VWRD annual dividend (2%) : $2,000
Duration of holding (year) : 40

DBSV UK commisions (0.35%) : $3,500
DBSV annual dividend fee (1%, min GBP3, max GBP30): $80
DBSV annual custody fee ($2 per counter per month): $24
DBSV total fees for 40 years : $7,660

DBST UK commissions (0.25%) : $2,500
DBST annual dividend fee (nil) : $0
DBST annual custody fee (0.20%, min $100) : $2,000
DBST total fees for 40 years : $82,500

SCB UK commissions (0.25%) : $2,500
SCB annual dividend fee (nil) : $0
SCB annual custody fee (nil) : $0
SCB total fees for 40 years : $2,500

SCB Priority UK commissions (0.20%) : $2,000
SCBP annual dividend fee (nil) : $0
SCBP annual custody fee (nil) : $0
SCBP total fees for 40 years : $2,000


Questions:
  1. Is SCB's FX spread any better/worse than DBSV's?
  2. Is cash balance or holding in SCB subject to foreign (US/UK) estate tax?
  3. Is the SCB trading account a true SG-domiciled account like in DBSV/POEMS?
  4. Is there a better alternative than SCB?
  5. I am clueless about SCB (am not currently its customer). How long has SCB been in SG, especially in the local brokerage business? Is the price going to stay in the long run? Any chance of SCB ceasing the brokerage business within the next 40 years? I know I can transfer the shares out, but would prefer to choose a reliable broker, right from the start.
  6. Did I miss anything?

Thank you very much for your input!

Last edited by hwckhs; 20-03-2019 at 10:42 PM..
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Old 20-03-2019, 11:19 PM   #2
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Have you considered Brexit and the reduced importance of London as a financial hub? Also 10-20 years from now the tax laws could change and it would probably make sense to move out of LSE listed ETFs.

My point is, you need to be prepared to make changes to your investments as the situation changes, you cannot plan now for next 40 years.
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Old 21-03-2019, 12:10 AM   #3
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Hello experts,

Am here to seek advice.

A little background about myself. I'm 40 yo. A newbie and a buy-and-hold-forever investor (will do periodical rebalancing). I have been DCA'ing into SGX (STI ETF + REITs) since last year. I used POEMS for that, but will switch to DBSV Cash Upfront (0.12% comm). Stocks are kept in CDP. All that is good.

Now, I am planning to gain exposure to the global market, with around $1M in the next few years . I plan to buy VWRD (Vanguard FTSE All World, distributing) on LSE. Maybe will allocate a small portion to 3188:HK (CSI 300 ETF), but not decided yet. A big issue I am having is deciding the best broker for my use case.

I read that IBKR is the best cost-wise (low comm and small spread), but I have to dismiss it for the following reasons:
  • IBKR is a US-based broker. Cash balance above US$60k is subject to US estate tax. As I plan to keep the portfolio till old age, there's a possibility that I may lose the ability to manage the account (think Dementia or plain too old) and it gets neglected. Dividends will keep flowing in and exceed the US$60k threshold.
  • I don't feel safe dealing with a broker with no local presence. When it's time for my successors to inherit this portfolio, I want the process to be hassle and risk free. Using a foreign broker increases the risk of complications (eg. unwarranted tax, complicated process?), and the cost for recourse will be high, not to mention the time and hassle involved.

I am willing to pay a small price to use a local broker for the peace of mind. Initially I planned to use DBSV. And, I learnt about DBS Treasures, but found it to be expensive in the long run despite lower comm. I did not consider SCB initially (was leaning towards "true" local banks/brokers), but SCB appears to be the most sensible choice for me now.

Assuming I build a $1m portfolio in the next few years and hold it for 40 years. Below shows my Excel calculations. For simplicity, I am omitting the cost of rebalancing. As only a small portion of portfolio needs to be rebalanced, I guess that may increase the comm amount by 10% at most...

VWRD capital : $1,000,000
VWRD annual dividend (2%) : $2,000
Duration of holding (year) : 40

DBSV UK commisions (0.35%) : $3,500
DBSV annual dividend fee (1%, min GBP3, max GBP30): $80
DBSV annual custody fee ($2 per counter per month): $24
DBSV total fees for 40 years : $7,660

DBST UK commissions (0.25%) : $2,500
DBST annual dividend fee (nil) : $0
DBST annual custody fee (0.20%, min $100) : $2,000
DBST total fees for 40 years : $82,500

SCB UK commissions (0.25%) : $2,500
SCB annual dividend fee (nil) : $0
SCB annual custody fee (nil) : $0
SCB total fees for 40 years : $2,500

SCB Priority UK commissions (0.20%) : $2,000
SCBP annual dividend fee (nil) : $0
SCBP annual custody fee (nil) : $0
SCBP total fees for 40 years : $2,000


Questions:
  1. Is SCB's FX spread any better/worse than DBSV's?
  2. Is cash balance or holding in SCB subject to foreign (US/UK) estate tax?
  3. Is the SCB trading account a true SG-domiciled account like in DBSV/POEMS?
  4. Is there a better alternative than SCB?
  5. I am clueless about SCB (am not currently its customer). How long has SCB been in SG, especially in the local brokerage business? Is the price going to stay in the long run? Any chance of SCB ceasing the brokerage business within the next 40 years? I know I can transfer the shares out, but would prefer to choose a reliable broker, right from the start.
  6. Did I miss anything?

Thank you very much for your input!
Scb spread is roughly 0.5%.
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Old 21-03-2019, 12:30 AM   #4
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Have you considered Brexit and the reduced importance of London as a financial hub? Also 10-20 years from now the tax laws could change and it would probably make sense to move out of LSE listed ETFs.
I searched high and low for global/US/China ETFs on SGX, but there is none that is large and liquid. Then, I started to look at global exchanges (HKEX, LSE, then US). HKEX is good for China ETFs, but their global/US ETFs are also small and have the same US dividend tax inefficiency as those on SGX.

The only place I can find good global ETFs are those Irish ETFs on LSE. Initially, I was very worried too about Brexit and the slow decline of UK (as a financial hub or as a whole). However, when I think rationally, the one I plan to buy (VWRD) is physically tracking a world index, and not UK's index. UK's weight in a world index is in a low single digit %. Even if London loses its shine in future, the ETF should still trade close to its NAV. At most, the AUM and liquidity may be reduced. I think the biggest risks of buying Irish ETFs on LSE are: 1) changes to US-Ireland tax treaty, 2) changes to Irish tax or UK tax law that affects foreign investors. I think neither Ireland nor UK will change things drastically that affects foreign investors, as doing so will degrade their economy (Ireland) or financial hub status (UK). Going by what their government did in recent years, eg. Irish deemed disposal but for Irish residents only, and UK removing stamp duty on ETFs only show that they want to maintain status-quo, if not more pro-investor.

I do not know the actual % of these Irish ETFs being held by foreign investors, but I guess it is substantial, maybe half? If iShare and Vanguard can setup so many ETFs in Ireland and list them on LSE, I believe they are reasonably confident that Ireland/UK are good places outside US for such purpose.

I appreciate your advice, and understand I need to keep watching constantly for adverse changes and be prepared to change my plan. I'm just planning as best as I can with a long term view. Thanks
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Old 21-03-2019, 12:32 AM   #5
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Scb spread is roughly 0.5%.
Thanks for that. Do you know how does this compare against DBSV?
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Old 21-03-2019, 05:01 AM   #6
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I am willing to pay a small price to use a local broker for the peace of mind.
It's not going to be a small price. Both DBSV and Stanchart are going to have considerably worse FX spreads than Interactive - that's going to cost you at least $5000 on a $1mio portfolio worth.

Compare that against the US estate tax. If you genuinely go totally senile and forget your dividends and then die, you would have to forget about the portfolio for at least five years before the cost of the estate tax exceeds what you pay in extra FX spread and commissions. I would just use IBKR.

Anyway. If you're hellbent on using a local broker...

  1. Is SCB's FX spread any better/worse than DBSV's?
  2. Is cash balance or holding in SCB subject to foreign (US/UK) estate tax?
  3. Is the SCB trading account a true SG-domiciled account like in DBSV/POEMS?
  4. Is there a better alternative than SCB?
  5. I am clueless about SCB (am not currently its customer). How long has SCB been in SG, especially in the local brokerage business? Is the price going to stay in the long run? Any chance of SCB ceasing the brokerage business within the next 40 years? I know I can transfer the shares out, but would prefer to choose a reliable broker, right from the start.
  6. Did I miss anything?
1) I don't know. I think they're about the same.
2) No.
3) Yes.
4) No, not really.
5) Stanchart's had a presence in Singapore since the mid-1860s (not a typo). They're not going anywhere.
6) Not really, no.
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Old 21-03-2019, 09:24 PM   #7
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It's not going to be a small price. Both DBSV and Stanchart are going to have considerably worse FX spreads than Interactive - that's going to cost you at least $5000 on a $1mio portfolio worth.
Thank you for highlighting this. The FX spread is a hidden fee that is not published by brokers. Comparing on commission fee and other fees alone is incomplete.

@bobobob wrote about SCB's spread being 0.5%. IIRC, I read it somewhere that IBKR's spread is about 0.125% (correct me if I am wrong). Using Excel to calculate the total cost, including reinvesting all dividends. After 40 years, I found the total fees to be:
  • SCB personal: $23,048
  • SCB priority: $21,520
  • IBKR: $5,402

The winner is clear.


1) I don't know. I think they're about the same.
2) No.
3) Yes.
4) No, not really.
5) Stanchart's had a presence in Singapore since the mid-1860s (not a typo). They're not going anywhere.
6) Not really, no.
Thanks for answering my questions. IBKR has a steep learning curve for newbies. I guess I need to create an account with both SCB and IBKR, and test them out before deciding how to make the best use of them.
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Old 21-03-2019, 09:30 PM   #8
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Thank you for highlighting this. The FX spread is a hidden fee that is not published by brokers. Comparing on commission fee and other fees alone is incomplete.

@bobobob wrote about SCB's spread being 0.5%. IIRC, I read it somewhere that IBKR's spread is about 0.125% (correct me if I am wrong). .

Even lower

https://www.interactivebrokers.co.uk/en/index.php?f=39753&p=fx
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Old 21-03-2019, 09:38 PM   #9
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Even lower
That's eye popping! Thank you.
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Old 21-03-2019, 10:13 PM   #10
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if you are on Priority Banking on SCB with US$ account, you can deposit US$ currency notes without any charges.

So if you have a good moneychanger that can give good rates, then go ahead and change and deposit the US$ notes into your SCB account

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Old 21-03-2019, 11:28 PM   #11
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Scb spread is roughly 0.5%.
The last time i checked, the diff between SCB and IBKR was 0.65%:

Right now on 22 Jan 2019, 3pm, to get US$1,000:
- SCB is quoting me: S$1369.86
- IBKR is quoting me: $1360.90 (+US$2 commission)
- Google is quoting me: $1361.00

The diff is +0.65% for SCB
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Old 21-03-2019, 11:30 PM   #12
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Why not stick with DBSV?
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Old 21-03-2019, 11:43 PM   #13
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The last time i checked, the diff between SCB and IBKR was 0.65%:
Thanks!

Why not stick with DBSV?
I will use DBSV for SGX trades, but for foreign (LSE/HKEX) trades I need to choose between IBKR/SCB.
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