MoneyOwl rolls out low-cost investment portfolio service

MONEYOWL, NTUC Enterprise's financial advisory subsidiary, is rolling out its investment portfolio service for retail investors, which will neither carry a sales charge nor receive any trailer fees.

Trailer fees are the portion of funds' annual management fees that are typically paid to a distributor or adviser. For advisers, this forms part of recurring revenues. Trailer fees of a retail fund could comprise as much as half of the fund's annual management fee.

MoneyOwl is a joint venture between NTUC Enterprise Cooperative and Providend Holding. It is positioned as a "bionic'' adviser which means that clients can transact purely digitally, or through a dedicated team of advisers.

MoneyOwl chief executive Chuin Ting Weber says the firm aims to make "conflict-free advice and fit-for-purpose financial solutions accessible so that all working families can achieve greater financial security and better retirement adequacy''.

"Investments and retail fund management must return to their core roots of serving a person's retirement and overall financial goals ... Successful investing is not about maximising returns or even maximising risk-adjusted returns. It is about getting the best probability of meeting your financial goals so that you can achieve your life goals,'' she said.

The investment module is the third service rolled out by MoneyOwl since its launch last year. It began with an insurance module, selling mainly term assurance as a cost efficient way to get life cover. Earlier this year it rolled out a will writing service. The fourth service will be comprehensive financial planning which is expected to integrate national schemes like the CPF. This is expected to be ready in the second half of the year.

The minimum investment in a portfolio is S$100 for one-off investments and S$50 a month for regular savings plans. The all-in annual fees start from 1.15 per cent for a conservative portfolio, to 1.21 per cent for an equity portfolio. The all-in fee comprises an advisory fee of 0.65 per cent, platform fee of 0.18 per cent, and DFA annual fund expenses which range from 0.32 to 0.38 per cent. A typical retail equity fund would charge well over one per cent in annual management fee.

Those who invest between now and May 31 will enjoy a reduced advisory fee of 0.5 per cent a year until December. The fee reverts to 0.65 per cent in January 2020.

The portfolios will be invested in Dimensional Fund Advisors' funds. DFA has built a presence in Singapore since around 2013, when its funds were made available to accredited investors. It secured its retail fund management licence earlier this year, and has registered nine funds for retail sale. Its funds are available only through financial advisory firms.

DFA, which boasts academics Nobel laureate Eugene Fama and Kenneth French as directors, manages some US$576 billion in assets. It is known for its refinement on the vanilla index fund, tilting it towards three factors of value, small caps and profitability, which are found by empirical research to generate higher returns over the long term. The caveat is that investors have to stay invested and ride out the risk.

With this approach, DFA arguably pioneered the "smart beta'' or factor-based investment approach that has become mainstream today. Over a 15-year period from 2003 to 2017, 73 per cent of DFA's equity and fixed income outperformed their prospectus benchmarks. In contrast, only 14 per cent of equity and fixed income funds that were around at the start of 2003 beat their Morningstar category index.

Says Chen Peng, DFA chief executive for Asia ex-Japan: "Dimensional is excited to work with MoneyOwl to bring (our) approach to more investors in Singapore.'' He says the firm has invested by "implementing great ideas in finance'' since 1981. "It's an approach backed by decades of academic research and one based on a belief in markets, which bring together the collective knowledge of millions of buyers and sellers to set security prices. We draw from those prices information about expected returns.

"So instead of trying to outguess the market, we focus on areas where we can use information from the market to deliver higher expected returns - in research, designing and managing portfolios and ultimately helping clients reach their goals.''

On DFA's market in Asia, Dr Chen says the firm has seen a "continued build-up in demand''.

"Certainly we know that the market in Singapore and Asia is generally still predominantly based on a sales driven process. Globally we work with fee-based advisers and advisory firms ... We're relatively optimistic. At this point we've seen increased demand from advisers and the investment community, and we have subsequently increased the resources devoted to helping investors in the region.''

MoneyOwl portfolios will be invested mainly in three DFA funds, investing in global equities, emerging market large cap equities and global fixed income. The funds are broadly diversified. The Dimensional Global Core Equity Fund, for example, holds around 7,750 securities.