Is there still a place for the ‘traditional’ stockbroker in Singapore?
For the longest time, the Singapore stockbroking industry was dominated by local banks and brokerage firms. But with the liberalisation of the industry, many international brokers have entered Singapore offering new products and services at competitive prices. In recent years, discount brokers in particular have proliferated and gained popularity among investors here (especially younger ones) due to their low commissions and fees.
With a sea of choices and low prices everywhere, how do ‘traditional’ stockbrokers compete and remain relevant to the Singapore investor?
The Central Depository
Unique to Singapore is the Central Depository (CDP) securities account operated by Singapore Exchange (SGX). When you open a CDP account in Singapore, it serves as a centralised holding account that safekeeps your investments in SGX-listed stocks and bonds.
Having a centralised account like the CDP means that even if you decide to switch stockbrokers in the future, you won’t have to move your investments from your old broker to the new; everything is still held and transacted through your personal CDP account. (In contrast, the U.S. market doesn’t have a centralised system like the CDP. If you want to switch brokers entirely, you must liquidate, or move your investments to your new broker which can incur hefty fees.)
There is one catch about the CDP though – your broker must have the facilities to link with your CDP account. And many of the new, discount brokers do not offer access to CDP.
Benefits of a CDP account
You might be wondering what are the benefits of having a CDP account? Is it that important to have one when investing in Singapore stocks and bonds?
Well, I’ve already listed one benefit of the CDP account above – it serves as a centralised account which streamlines things whenever you switch to a different broker. But that’s not the only benefit of having a CDP account, here are some more advantages:
All the securities you hold in your CDP account are held directly in your name. This means you are the direct, legal owner of your stocks and bonds.
On the other hand, without a CDP account, your securities are held by the broker via a nominee account. This means that the broker is the direct owner of the securities and holds them on your behalf. Although using nominee accounts is a safe and accepted practice across the stockbroking industry worldwide, there are still minor risks involved especially if a broker is less than reputable.
In the very unfortunate event that your broker goes bust, your securities are still safe in your CDP account, and you can continue to trade by simply using another broker.
If your securities are held in a nominee account, your assets are also legally protected from a broker’s insolvency. However, your assets are frozen until the broker’s records are verified. Once due process is completed, your assets can be then transferred to another firm. In the meantime, it will likely be a highly stressful experience for investors waiting in limbo!
3. Annual general meetings
If you’re one that enjoys attending a company’s AGM, then owning stocks directly through your CDP account will be more convenient for you. As the direct owner, you are therefore listed on the company’s share register, and the company will send the invitation to attend the AGM directly to you.
If you own stock via a nominee account, the company will not recognise you as a shareholder (because the broker is the direct owner). You will have to send a request to your broker to appoint you as a proxy if you want to attend the AGM. If you have the free time, attending the AGM is great way to learn more about the company and its management, and gain an informational advantage.
4. Voting rights
Similarly, you can only vote directly if you listed as a shareholder on the company’s share register. If you own stock via a nominee account, you will have to notify your broker on how you wish to vote.
If you own a stock directly in your CDP account, any dividend you receive will automatically be credited to the bank account linked to your CDP account. If you own stock via a nominee account, the dividend will be paid to the nominee (your broker) then credited to your cash balance in your brokerage account. After which you can withdraw the cash to your bank account.
If you’re a dividend investor, then owning stocks directly in your CDP account is a lot more convenient. (It’s also more satisfying seeing dividends flow directly to your bank account on a regular basis.)
Use the CDP account for SGX stocks
Knowing the benefits, my preference is to own SGX-listed stocks directly in my CDP account. This is especially useful since I mostly invest in dividend stocks and REITs when it comes to Singapore.
The convenience of attending and voting at meetings, and seeing your dividends credited directly to your bank account is a big plus. Because of this, I would pick a traditional broker like Phillip Securities that links with your CDP account.
Phillip Securities is an award-winning multi-asset, multi-market stockbroker. Founded in 1975, it is one the oldest and most well-established brokers in Singapore. Its trading platform, POEMS, has a wide range of investment products including stocks, bonds, unit trusts, ETFs, forex, futures, and gold. Besides Singapore, POEMS also offers access to the U.S., China, and Hong Kong, along with other stock exchanges in Asia and Europe.
Another plus point — Phillip Securities also links with your CPF/SRS account. This is extremely convenient if you’re someone who invests using your CPF monies.
Although Phillip Securities has been around for 47 years (and counting) in Singapore, it has kept pace with the latest innovations in the industry. Its latest trading app, POEMS Mobile 3, has a modern user interface and includes features like TradingView charts, watchlists, portfolio management, news alerts, and an economic calendar all directly onto the app. POEMS Mobile 3 also offer smart authentication and you can also securely log into your POEMS account using face/fingerprint recognition.
With POEMS Mobile 3, you can easily keep track of your investments with easy access to your account history, orders, balances, and positions all from one trading app.
If you have a barbell strategy where you invest in in the U.S. or China for growth and Singapore for dividends, then Phillip Securities is a great solution as it gives you the best of both worlds – access to global markets and the CDP account for Singapore stocks.
The fifth perspective
I believe traditional brokerages like Phillip Securities still play a key role when you invest in the SGX. The peace of mind that comes from knowing that your investments are safe in your CDP account and directly owned under your name is reassuring. This is one advantage that discount brokers don’t offer at this time.
Open a POEMS account and download the POEMS Mobile 3 app to participate in the POEMS Hunt and win attractive prizes! From now till 8 May 2022, stand to win prizes including 1 free Mastercard, Apple, or Citigroup share, iPad Air 64GB, AirPods 3rd Gen, Apple Watch Series 7, iPhone 13 128GB, and more.
Simply be the first to locate the hidden icon within the POEMS Mobile 3 app and submit the hidden code to win the top prize of the week. Up to 47 participants will win the top and consolation prices each week! Terms and conditions apply.
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This article was written in collaboration with Phillip Securities. All views expressed in the article are based solely on The Fifth Person’s independent opinion.
The content is provided for entertainment & informational use only. The information and data used are for purposes of illustration only. No content herein shall be considered an offer, solicitation or recommendation for the purchase or sale of securities, futures, or other investment products. All information and data, if any, are for reference only and past performance should not be viewed as an indicator of future results. It is not a guarantee for future results. Investments in stocks, ETFs, and other instruments are subject to risks, including possible loss of the amount invested. The value of investments may fluctuate and as a result, clients may lose the value of their investment. Please consult your financial adviser as to the suitability of any investment. This advertisement has not been reviewed by the Monetary Authority of Singapore.
One thing that needs to come to an end in Singapore is the practice of trading shares in “board lots”. Most of us will get the opportunity to participate in a dividend re-investment plan (or “DRP”). All too often this results in us ending up with “odd-lots” that can be costly to dispose of with absurd price spreads quoted by sometimes disdainful and uninterested people at the brokerages. It’s time that the SGX brought this antiquated practice to an end. Maybe it’s to keep some of the old-timers at the brokers’ offices in a job. There’s certainly no need for it in a computerized market.
Thanks for sharing Jonathan! Yes, ending up with odd lots is a huge hassle. Hopefully this will change in the near future with how brokerages are becoming increasingly digitised everywhere.
How much does phillips charge in commissions vs a discount broker.
For pre-funded accounts, Phillip charges 0.08% commission and no minimum for SGX stocks, which is comparable to moomoo’s 0.03% and $0.99 minimum for example.
For CDP-linked trades like I shared in the article above, Phillip charges 0.28% and $25 minimum which is quite standard across the industry.
You can view full pricing details here: https://www.poems.com.sg/pricing/