So you’re talking to a financial advisor (FA) and they’re offering to help you invest your money via iFAST.
You’re thinking to yourself, what the heck is iFAST and should I even put my investment there?
Well, you’re in luck, because in this post, I’m going to talk more about what is iFAST and what you should take note of when your financial advisor offers you this service.
What is iFAST?
If you are familiar with one of the most popular online brokerage accounts in Singapore, FSMOne, iFAST is the B2B arm while FSMOne is the B2C platform.
However, what makes iFAST different from FSMOne is that iFAST provides an all-in-one system for financial advisors to manage your investments for you.
From creating an account, managing fees and monies involved, and choosing the funds to invest in, your financial advisor can do everything from scratch for you.
Why iFAST as an Investment Option?
iFAST is a great investment option for you due to the wide array of products it offers. iFAST’s competitive advantage lies with its ever-expanding suppliers of fund houses, insurers, and banks.
With more suppliers and its all-in-one offering, B2B customers are attracted to them as it provides them with ease in managing their clients’ investment portfolios.
And with more B2B customers using iFAST, more suppliers will continue coming on board to offer these B2B customers solutions to you as the consumer.
For you, this means that if you take up your financial advisor’s offer to invest via iFAST, there are more funds for them to choose from that could generate better risk-adjusted returns for you.
No Lock-in Period
Unlike investment-linked policies (ILPs), there is no lock-in period if you select iFAST as your investment option.
So you’re pretty much free to invest for as long (or short) as you want.
If you’re investing only for the short-term, you won’t see much growth as you won’t have much time to reap the effects of compounding.
For most individuals, long-term investing is the goal. Therefore, if you’re investing for the long haul, lock-in periods won’t really matter if you’ve done your financial planning right.
However, it’s still nice to know your money isn’t locked.
iFAST’s business is highly scalable because of its business model. iFAST has reached a significant scale over the years as recurring net-revenue-to-AUA has exceeded operating-expenses-to-AUA.
Licensed and regulated by the Monetary Authority of Singapore (MAS), your money and securities are kept separate from the company’s. They are also subject to strict regulations to ensure that their operations are in line with MAS’ guidelines.
So if you’re worried about iFAST potentially going bust or running away with your money, it’ll unlikely to do so.
Typical fees and charges you might need to pay if you engage a financial advisor for iFAST
There are different fees and charges involved when engaging a financial advisor to invest for you via iFAST.
Depending on how the financial advisor is remunerated, the below might change accordingly.
Continue reading to find out.
First up is the sales charge. There are different terminologies to this such as the transaction charge or sales fee, which all essentially mean the same thing.
This charge occurs whenever a transaction is made. Your initial investment and future transactions will incur this fee as iFAST charges this amount to your insurer (and thus your financial advisor), and work is required to purchase your funds.
Expect a sales charge between 1% to 3%, with 1.5% to 2% being the norm and anything higher is usually considered expensive.
Asset Under Advisory (AUA) / Asset Under Management (AUM)
Next up comes the AUA/AUM fees involved. This is essentially the performance/management fee that your FA charges you to manage and grow your investments.
This fee is most commonly charged on a yearly basis, with quarterly and biannually being a possibility as well.
Expect anywhere between 0.5% to 2% per annum for this fee, with 1% to 2% being the norm.
This fee is calculated as a percentage of the total value of your assets.
So if you have $100,000 invested and your FA charges a 1% fee per annum, that’s $1,000 in management fees.
Depending on how much assets you have, the FA might also have a tiered approach to this fee.
Here’s an example of how the tiered approach might look like:
|Up to $500,000||1.5%|
|Up to $1,000,000||1%|
Do note that your FA doesn’t keep the entire amount. A part of this goes to iFAST to pay for their platform fees and another part goes to the insurer that your FA is representing.
iFAST CPFIS Investments
You’ll be happy to know that you can invest your CPF monies using iFAST.
Under the former CPFIS, investment product distributors could charge maximum sales charges of 3% and maximum wrap charges of 1%.
To counter this, the government eliminated sales charges and placed a 0.4% cap on wrap charges (AUA/AUM fees), effective from 1st October 2020.
This means that your CPFIS investments are subject to a maximum of 0.4% fee yearly should you use iFAST to invest – making it extremely attractive as it’ll be easier for you to beat the 2.5% returns provided by your CPF-OA.
Is Investing Through iFAST Better Than Regular Savings Plans?
Similar to regular savings plans (RSP), all you have to do is decide your initial investment, how frequent you’d like to invest, and how much you’d like to invest each time.
This makes it extremely easy for you to start investing as everything is managed for you by your financial advisor.
The main difference between RSPs and iFAST is the fees involved where RSPs are cheaper.
However, regular savings plans require you to make investment decisions on your own, thus the lower fees.
iFAST investments however are managed by your financial advisor. Therefore the higher fees are used to pay your FA for his time, effort, and expertise.
If you’re confident in your fund selections, an RSP can be better for you.
However, if you’re not, your FA might be able to produce better returns for you (after fees) should you decide to opt for iFAST.
Is Investing Through iFAST Better Than Doing It Yourself?
The simple answer to this is no. If you know what you’re doing, DIY investments are definitely much better and cheaper as you only pay platform fees on the brokerage account of choice.
But if you aren’t, your FA might be able to generate better returns (after fees) if you use iFAST.
If your returns on DIY investments is only 6% annually and your FA makes you 6% returns annually after fees, which do you think is better?
Personally, I’d rather engage the FA.
So that I don’t have to do the research, management, and transactions myself just to achieve the same results when someone else can do it for me.
Of course, this depends if I can get the 6% returns per annum (or more) or if the FA can make me 6% annually after fees.
Is investing through iFAST better than ILPs?
This is one of the most commonly asked questions we’ve received from our readers – and it’s not without merit.
Based on us crunching some numbers, here are our answers:
If you’re investing for longer than 10 years, iFAST will not perform better than ILPs.
If you’re investing for 10 years or less, iFAST will perform better than ILPs.
We made a few assumptions when making this calculation.
iFAST sales charges are set to 2% and AUA fees are 1% per annum.
We’ve also selected the Manulife InvestReady Wealth II as the ILP for our comparison due to it having the lowest fees amongst ILPs – 2.5% per annum for the first 10 years and 0.7% per year thereafter.
Assuming 6% annualised returns and $1,000 monthly investment for both iFAST and ILPs, we’ve found that iFAST outperforms the Manulife InvestReady Wealth II for the first 11 years.
From the 12th year onwards, the Manulife InvestReady Wealth II performs better than iFAST as the fees dropped significantly from 2.5% to 0.7% with no transaction fees incurred.
Furthermore, ILPs come with bonuses to further grow your money that iFAST doesn’t come with.
However, it’s important to note that the number of years is affected by your total yearly investments as the bonuses you’ll receive is dependent on how much you invest with the ILP.
In our assumption, we chose a monthly investment amount that maxes out the bonuses from the Manulife InvestReady Wealth II.
If you’re investing less than $12,000 a year, iFAST will perform better for the first 15 years only.
Click here for a more in-depth comparison of iFAST vs ILPs!
With more information on iFAST, I hope that you’re clearer in deciding if iFAST is for you. As with all investment options, there are pros and cons to it.
Due to iFAST being a managed investment service, the fees you’ll incur is definitely much higher than doing it yourself.
However, if you’re not sure if you’re able to achieve the returns you want by yourself, or generally don’t know anything about investments, iFAST might be an option for you.
Based on our calculations, if you’re investing for more than 11 or 15 years, an ILP such as the Manulife InvestReady Wealth II might be better.
However, if you’re investing for lesser than 11 or 15 years, iFAST will be the better option.
If you’d like to talk to someone regarding investments, talk to a financial advisor in our network. They have a proven track record of making returns for many of their happy clients.