Opening a brokerage account is the very first step to buying shares. However, with so many brokerage options available, new investors might not know which one to choose. There is the option of going with banks, online international brokers or local brokers. Each has its own pros and cons. To save you the trouble of going through each one individually, I decided to do the dirty work for you and break down the pros and cons of each.
Bank brokerage accounts
There are a few prominent local bank brokerages to choose from. The most notable ones are OCBC Securities, DBS Vickers, UOB Kay Hian, Standard Chartered Online Trading and Maybank Kim Eng.
Advantages of bank brokerage accounts
- No minimum deposit
Unlike some local and overseas brokers, there is no minimum deposit required. However, you may need to set up a savings account with the bank to link your brokerage account. If you already have this done, you can simply withdraw cash from this savings account for your investments.
- Have local presence
All the banks listed above have offices in Singapore. If you are facing technical difficulties, you can simply make a call or meet the customer support team directly.
You can be quite certain that the banks have the stability and financial muscle to withstand any downturns. This is especially important when considering that the banks hold your foreign stocks in their custody account.
- Withdrawals and deposits linked to your bank account
To make a transaction, you can simply transfer cash to the brokerage account from your bank accounts and make the transaction.
- No inactivity fee
Banks do not charge an inactivity fee. You, therefore, do not need to worry about making a transaction each month. You can invest as and when you have the capital.
Disadvantages of bank brokerage accounts
- More expensive than brokers
The transaction fees for banks differ from bank to bank. However, they are all generally higher than overseas and local brokers.
- Custody fee
Many banks charge a custody fee for overseas stocks. This means that they charge a fee to hold your stocks in their accounts. The fee is usually $2 a month.
- Platform not of the highest quality
Banks in Singapore, unfortunately, do not have the best platforms available. For instance, UOB Kay Hian’s Portfolio analysis system is unable to track stock splits, bonus issues, and reinvested dividends. This can be frustrating investors if they rely on the portfolio tool to track their returns.
My recommended platform among banks
Among all the bank brokerages available in Singapore, I would recommend Standard Chartered. Their platform is user-friendly, and you can purchase stocks from multiple countries including the US, Hong Kong, and the UK.
The biggest draw, though, is the competitive rates that Standard Chartered offers. It has the lowest transaction fees in the bank market. Users are charged the minimum transaction fee of $10 or a 0.2% brokerage fee – whichever is higher. As a point of comparison, UOB Kay Hian charges a minimum fee of S$25 or 0.275%, while DBS Vickers also charges a minimum fee of $25 or 0.28% of the transaction amount.
Standard Chartered also waives the custody fee. This is important for those who invest in foreign stocks as custody fees can add up in the long-term.
The Foolish takeaway
So far, we have looked at banks as a brokerage option. Among them, I highly recommend using Standard Chartered due to the lower fees and easy to use online platform. In the next article, I will take a look at online brokers as an option for investors.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.