Charles Schwab entry in S'pore heralds new era for investors

Singapore

A NEW era of investing revolution is taking place in Singapore, with discount brokerage powerhouse Charles Schwab opening an office in the city-state, rattling not just stock brokerages but private banks with its promise of "no trade-offs for investors between quality advice, price and customer experience" .

The New York Stock Exchange-listed brokerage - which has morphed from a discount broker founded in 1971 to a leading global wealth manager with more than 10.6 million active brokerage accounts and US$3.18 trillion in client assets - believes that investment portfolios here and in the region are under-exposed to the US market due to high transaction fees and unfamiliarity.

It wants to provide Singapore and Asian investors with greater access to the US market through its proprietary tools and research, quality service and competitive pricing.

"We are offering to investors in Singapore a simple fixed-fee structure with the most competitive pricing in the market," Greg Baker, Schwab's managing director for its Singapore office told The Business Times.

The launch of Charles Schwab Singapore follows a successful system integration and accounts migration in October in Singapore from optionsXpress, a derivatives trading platform that Charles Schwab acquired in 2011.

On why Schwab was setting up shop here only now, Mr Baker told BT that the brokerage had to ensure full integration of the system to ensure consistent service level for its clients. Full integration was achieved in October.

"This is a moment of great strength in the overall Schwab franchise, which enables us to seek opportunities to expand our proven model of serving US market investors in new growth-oriented markets," he explained.

Mr Baker said that Schwab had chosen Singapore because it is one of the key financial hubs in Asia, and has a market with sophisticated investors who are looking for returns through international markets but are restricted due to high fees.

Access to US markets is already provided by local brokerages such as DBS Vickers Securities and Phillip Securities as well as various online platforms like Saxo Capital Markets and TD Ameritrade, among others.

A check of various websites showed that for online trades, most brokerages charge a minimum commission of US$20-25 or 0.3 per cent of the trading principal, whichever is higher. For those who trade frequently, the costs can build up quickly.

Take for example an investor looking to invest US$25,000 on a US-listed stock, say, Apple or Google. The commission fee that he or she needs to pay to a local brokerage such as DBS or Phillip will be US$25,000 x 0.3 per cent, which comes up to US$75.

In contrast, if this investor trades through Charles Schwab, he or she will be charged a flat fee of only US$4.95. But it pays to note that there is a minimum amount of US$25,000 for opening an account with Schwab.

Mr Baker noticed that investors here and in the region do not sufficiently diversify their investments, and their exposure to international markets is predominantly through foreign exchange, when there is an opportunity to maximise their investment return by exploring other vehicles such as options, stocks and exchange traded funds or ETFs.

"What we mean by improving access is that one no longer needs to be a private banking client to access quality service and a comprehensive platform like this," he said.

"That is the core of our belief: there do not have to be trade-offs between quality research, price and customer experience - and that is why we are excited to bring this to the Singapore investors," he added.

Late last year, Schwab unveiled plans to expand its suite of wealth management and advisory services with the launch of Schwab Intelligent Advisory, a hybrid service that combines its automated investment management technology with human advisers.

The service provides clients with a financial and investment plan, unlimited access to a human adviser via phone or video conference, and an investment portfolio of ETFs managed by computer algorithms.

On Wall Street's rally, Mr Baker said that Schwab analysts have cautioned that the current bull market will be followed by a traditional bear market - either in anticipation of an economic recession and/or at a point of excess tightening by the Federal Reserve.

"While neither is currently in sight, Charles Schwab experts believe market volatility will increase, and have advised investors to continue diversifying their portfolios."

The Singapore office holds a capital markets services licence issued by the Monetary Authority of Singapore and is an Exempt Financial Adviser as defined in the Financial Advisers Act.