Sunday, July 4, 2021

My review of Moneyowl and Endowus

 [This post is not sponsored and i have accounts with them. The values stated are as per date of post]

The arrival of roboadvisors is a god-send and thanks to them, Singaporeans will be able to build their wealth quicker due to the lower fees. They have laid bare the ridiculous fee structure that have plaqued the wealth management industry. 

Imagine if your traditional finanical advisor sold you the fund above and you invested $100,000. You would have already paid fees of $5,000 at point of purchase due to the initial sales charge of 5%. Additionally, you will be paying $1700 every year due to the management fee, part of this fee going back to the traditional financial advisor as trailer fees and part of it being fund-level fees being paid to the asset managers. This is ridiculous and indeed passive income for the advisor.

Instead, if you had invested this $100,000 with a roboadvisor, you will be paying zero initial sales charge and very likely less than $1700 every year depending on the platform or access fee or the trailer fee rebates given by the roboadvisor. 

The reduction in fees is not a free lunch as the roboadvisors basically does not have much of an advisory, human touch, unlike a traditional financial advisor and they do not give advice on insurances for a complete financial review. ( MoneyOwl has a insurance and will writing on its platform but still no human element).If your traditional financial advisor has been doing a comprehensive financial review, including your insurances and mentoring you well along the away, helping you with medical claims and watching out for you, then please let him earn. Otherwise, fire him and go with the robos.

I am currently using Endowus and Moneyowl as i haven't found a traditional financial advisor who is worth the fees.  I have started with Endowus first as the founders values resonated with me  regarding transparency of fees and to help the public gain access with lower fees. It is quite challenging to compare roboadvisors as they seek to differentiate themselves with different products and each have their plus (negative)points. After reading up more on Moneyowl, i do see how one can further reduce fees at this point in time and i have redeemed all my investment using Cash out of Endowus and investing them into Moneyowl, leaving only my SRS in Endowus.

Both Moneyowl and Endowus are the only roboadvisors to have dimensional funds and these funds have no trailer fee rebates since their fund level fees are already so low. If one were to compare the universe of unit trust funds held by them, dimensional funds have the lowest fund-level-fees and if i were to get bang for the buck, i might as well invest in these which can't be found outside easily. These dimensional funds are unit trust and i could see similarities with popular ETFs such as IWDA and EIMI in terms of underlying composition of companies.  Specifically, IWDA( fund level fees 0.2%pa)  versus dimensional global core equity fund (fund level fees 0.26%pa) and EIMI (fund level fees 0.18%pa) versus dimensional emerging large cap core equity fund (0.36%pa).

Top Sector Weighting

Top Country weighting

Top Company weighting

Top Country weighting

Top Sector weighting

Top company weighting

From above, they are broadly similar in their country and sector weighting with many similar companies in their top 10. In terms of number of underlying holdings:

Dimensional Core equity fund ( fees 0.26%pa) : 7724


Dimensional Emerging Markets large cap core equity fund ( 0.36%pa): 1147 ( this may seem as though it has less companies than EIMI but take note that one of its holding is iShares MSCI India, so the number of holdings understate the true number of companies it has exposure to).

EIMI (0.18%pa): 2998

All the above are irish-domiciled and similar taxes prevail.

Now, a likely question would be: Why would i not want to DIY completely by buying the ETFs  instead of the UT since the fees for the ETFs are cheaper? I see some value in paying more in fund level fees if the number of underlying companies is more ( whether it mutes performance in boom times or crisis is another story). In addition, the UTs are priced in SGD while the ETFs are priced in USD. Rebalancing, investing and redeeming the UTs are less psychologically taxing as we do not have to deal with changing currencies and depending on the broker one uses, currency transaction cost can be expensive. Also, one would not be able to use their SRS to buy the ETFs in the first place. SRS is allowed for the UTs but not for ETFs, so for SRS investing its a no brainer as ETF is not an alternative.

Now the next question would be, how about the additional access fees( also known as platform fees) which are on top of the fund level fees paid to the robos, wouldnt these added layer of  fees now make it much more expensive than to DIY with ETFs? ( We cant DIY with UTs without the roboadvisors or approved financial advisor) This is a question i have been struggling with for many nights for my cash investment and my short answer is, it is better to DIY with etfs for the cash portion if one has the time and is disciplined. Imagine an investment of $100,000, one will be paying a yearly access fee of $600 to the robos (0.6%pa). Don't get me wrong, the robos have to be paid as they provide a service such as automatic rebalancing and access to such cheap UTs but it is too high for essentially something passively held by them without any further work. For me, due to my intense work and family schedule, i am still with the robo advisors for my cash and as usual still having thoughts of changing to DIY with ETFs frequently due to it being so much cheaper. 

Why did i transfer my cash to Moneyowl funds?

Moneyowl has a lower barrier to enjoy lower fees(now till mid 2022, with NTUC60 promo code, there is a 10% off the access fees). Less than 100K is 0.6%pa fees but above that is 0.5%pa. This is for  SRS and CASH. The SRS and CASH can be pooled together for the AUM so its easier to reach $100k to enjoy the 0.5%pa access fee for cash. This is tiered, meaning if one were to invest 110k, the whole amount is charged 0.5%pa and not 0.6%pa for first $100k and 0.5%pa for next 10k.

For Endowus, it is also similarly tiered like Moneyowl.  Less than 200K is 0.6%pa fees but above 200k  is 0.5%pa. Above $1 million, the access fees is 0.35% pa. This is for CASH. For SRS, it is 0.4%pa for any amount. The SRS and CASH cannot be pooled together for the AUM. They are treated separately for the fees unlike Moneyowl.

As i need to reduce the high fees, the strategy is to leave my SRS in Endowus for the  0.4%pa fees and transfer my CASH into Moneyowl for 0.5% pa fees ( being 0.45%pa fees till mid 2022 due to NTUC60 promo code). If Endowus could give a mid tier between $200,000 to $1 million of  0.4%pa fees, then my CASH would be with them. The thing is, there is no transaction fees for both of robos, so there is no switching cost between them.

In summary, i would suggest Endowus using SRS but for cash i would suggest MoneyOwl , until one hits $1 million in cash assets before switching these to Endowus since one would then enjoy a lower 0.35% pa access fees with Endowus. And i wouldn't bother with anything other than Dimensional Core equity and Dimensional emerging markets funds as their fees are the lowest while future performance is always an uncertainty between any other funds, so why risk it.

DIY ETFs through brokerages is still the best in my opinion if one has that time and psychological bandwidth at this point in time to rebalance and DCA until at least the robos lower their access fees to perhaps 0.2-0.3%pa which will make their 1)auto rebalancing,  2)not needing to convert currency and 3) no transaction cost (brokerages charge about 0.2% per buy and sell transaction) worth it. As these funds are usually held long term say 10 years or longer, 0.72% pa ( 0.6%pa access fees + 0.12%pa higher average fund level fees based on dimensional over said IWDA and EIMI ETFs) based on $100,000 investment will cost $720 extra per year and $7200 extra every 10 years.

With the access fees of 0.6%pa, i would not even consider investing my CPF OA. The dimensional funds performance  have to cross the hurdle rate of 3.41%pa guaranteed (2.5%pa CPF return+ 0.6%pa + 0.31%pa average fund level fees of the two said dimensional funds ) to make it breakeven.  Especially so when CPF OA has many important uses such as housing and education and could serve as  emergency funds.

I really do hope that as the robos get bigger with larger AUM under them, they will lower the access fees to around 0.25% flat like how the popular US robos like Betterment and Wealthfront  charges.

[I am not a financial or tax advisor. There is indeed a use case for the two robo advisors as stated and my referral code is here for endowus and here for moneyowl. For the former, we both get $20 off access fees and for the latter, we both get $20 grabfood credits]

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