I stumbled upon this page on Syfe’s official website attempting to make a case for investing with Syfe’s Core Equity100 portfolio rather than DIY ETF investing. At a fundamental level, I have nothing against responsible financial advisors or robo-advisors charging a small fee (below 0.5% per annum) in exchange for managing a client’s money through passive investing in low cost globally diversified equities funds. As Syfe itself alluded to, behavioural biases can lead to DIY investors underperforming the market, so there is a case to be made for simplifying the process for most people.

Syfe could’ve easily made a strong case for why most people should invest with them without resorting to unfair and misleading comparisons, but regrettably, here we are. Have a look at this infographic copied from their official page above:

Let’s assume we use InteractiveBrokers (IBKR) for DIY investing. You might contend that this is unfair, since IBKR has admittedly a steeper learning curve and not everyone would be comfortable using it. But I’d argue that in order to make a fair comparison, one can’t simply compute “average charges across traditional banks and online brokerages” as the fine print reads.

We’ll also be ignoring GST because Syfe ignores GST in the table above.

We’ll first look at the FX conversion fee and see if the numbers make sense. According to this official IBKR page, below a monthly trade value of USD 1 billion, each trade of value \(a\) carries a fee of \[ \max(a \cdot 2 \cdot 10^{-5}, 2), \] which is famously low and what IBKR is well-known for. Observe that as long as the trade value is below USD 100,000, you’re paying USD 2. You’re almost certainly not making 20 FX conversions per year while investing as a working adult in Singapore: the number is probably more like 12 times a year. This means the total FX fee per year is USD 24 (SGD 30 at the time of writing). This is lower than the lower end of the range provided by Syfe. IBKR also provides very tight bid-ask spreads so you’re paying very little to the spread.

It’s also important to note that the higher the trade value, the lower the fee as a percentage of the exchange value, up to a point. For example, changing USD 5,000 to SGD means paying 0.04% of the trade value, which is easily the top 3 in the industry. Changing USD 100,000 or more to SGD means 0.002%.

Let’s now look at brokerage and clearing fees. Again, if you’re doing DIY investing, you’re probably not going to be rebalancing a complicated portfolio every quarter, so the assumption of “20 buy and sell trades annually” is questionable. Regardless, to avoid withholding taxes on dividends, Singapore residents ought to invest in an Irish domiciled ETF listed on the London Stock Exchange. According to this page, below a monthly trade value of EUR 50 million under the Tiered pricing structure, each stock trade of \(a\) (in USD) costs \[ \min(\max(a \cdot 5 \cdot 10^{-4}, 1.70), 39) \] on top of exchange and clearing fees outlined in this page for LSE, amounting to (in pounds) \[ \max(a_\mathrm{GBP} \cdot 4.5 \cdot 10^{-5}, 0.10) + 0.06. \] To make the numbers more concrete, we have the following table, all in USD and assuming GBP/USD rate of 1.35:

Even at USD 13,000 per trade, 20 trades per year, we’re paying SGD 184.76 (at the time of writing) in total, which is below the figure given by Syfe.

Finally, the most insidious part: management fee. Syfe conveniently uses the very low SGD 10,000 as an example for management fee. At 0.65% of AUM, SGD 65 doesn’t look so bad! But what if you have a SGD 200,000 portfolio? What about SGD 1 million? Now you’ll be paying SGD 1100 and SGD 3500.

Meanwhile, the absolute costs of DIY investing stays the same. Even with a SGD 1 million portfolio or SGD 10 million portfolio!

For example, if you trade USD 13,000 per month with a portfolio of SGD 200,000, you’re paying a total FX and brokerage fee of \(30 + 184.76 = 214.76\) in SGD. This is only 0.11% of AUM! And the best part is, if you stop trading (perhaps due to retirement and stopping work), you’re paying 0.00% of AUM in FX and brokerage fees!

It’s true that with very small portfolios, the trading costs do occupy a decent part of the AUM. If you have a portfolio of SGD 10,000 and trade USD 1,000, 20 times per year, the total fee is 0.80% of AUM. This is quite high! But the good thing is, it reduces rapidly as your portfolio compounds and grows over time, and the majority of your investing lifecycle (if you do it early enough in life as you should) will be spent where the fee is much lower in percentage terms.

In the plot above, we assume a starting capital of SGD 10,000, monthly contribution of SGD 1,000, growing at 6% p.a. for 10 years, without any increase in contribution at all. This is just about the worst case scenario, because a capital of this low is going to be expensive to manage no matter where you go. Still, after just 2 years, the IBKR fees become approximately 0.20% of the AUM. At the same time, Syfe still charges 0.65% of AUM.

I’ll close by saying that I have no issues with Syfe’s investment approach in this particular offering. But they really didn’t need to mislead customers this way: there are much better and honest arguments they could’ve come up with for investing with them as opposed to DIY.

I have seen enough bullshit and lying by omission in this industry: it’s lamentable to see Syfe doing the same.