Compare local bank brokerages, local online brokers and international brokers on custody, cost and convenience.
Draw a grid with five rows and three columns. Label the rows custody, licensing entity, all-in costs, markets and transfer out. Label the columns bank-linked brokerage, local online broker and international broker. You'll fill it in during the activity.
The grid has five rows because choosing a broker on one number, such as the cheapest commission, leaves out important information. Each type of broker gives something up in order to be good at something else.
Hakim, an invented example, opened his first brokerage account through the bank that pays his salary. It took five minutes, his shares landed in his CDP account, and he never thought about it again. Then a colleague showed him an app that charged nothing to buy US shares, and he wondered how much he had overpaid over the last four years.
A bank-linked brokerage sits inside a bank group you probably already use. You log in with the same app, and money moves from your savings account without a transfer. SGX shares usually settle into your own CDP account, where they are recorded in your name at The Central Depository. Many bank-linked brokerages also offer US and other overseas markets. Those holdings go into a custodian account, a pooled arrangement, because CDP holds only SGX securities. Lesson 1.1, "Your overseas shares sit in someone else's name", explained both arrangements.
The trade-off is cost. Commissions are often higher than at other types of broker, and currency conversion is often done at the bank's own rate, which can be some way from the mid-market rate. Module 2 shows how to measure that gap. For a few large SGX trades a year, the convenience may be a fair price. For small monthly purchases of US shares, the costs add up.
A local online broker is based in Singapore, licensed by MAS, and often not part of a bank. It usually charges less than a bank-linked brokerage. Because the entity is licensed in Singapore, MAS rules on keeping client assets separate from the firm's own assets apply to it. The trade-off is that custody varies between brokers, and sometimes between markets at the same broker. Some offer a CDP account option for SGX shares and a custodian account for overseas markets. Others put everything, including SGX shares, into a custodian account to keep fees down. One app can hold your SGX shares in CDP and your US shares with a custodian in another country, so you have to read which is which.
An international broker is a large firm serving customers in many countries. It is often the cheapest for US trades, offers the widest choice of markets, and lets you hold several currencies in one account. The company whose logo is on the app is often the parent company. Your account may be booked with a Singapore subsidiary, a US entity or an entity in a third country, depending on when you signed up and where you live. That entity decides which regulator supervises your account and which protection scheme covers you, if any. Lesson 1.3, "What happens to your shares if your broker fails", covers those schemes. None of this makes an international broker a bad choice, but its cheap commission tells you little until you know which entity you are dealing with.
Compare every broker, whatever its type, on the same five factors:
Custody: are your shares in your own name at CDP, or in a nominee or custodian account? Where is that custodian? Licensing entity: which exact company holds your account, and which regulator licenses it? All-in costs: add up the commission, platform fees, custody fees and the FX spread on every conversion. Markets: which exchanges can you trade on? Can you hold US dollars, or must you convert each time? Transfer out: can you move your shares to another broker, and what does it cost?
Transfer out is the factor people skip most often. It means moving your holdings to another broker without selling them. If you lose confidence in a broker, a transfer keeps your holdings invested. Without a transfer route you would have to sell, convert back to Singapore dollars and buy again elsewhere, paying spreads and commissions twice and possibly selling at a bad moment.
Hakim filled in the five rows for his bank brokerage. Its commission was higher than the app's, but the bigger difference was the exchange rate. He did not have to switch, and he now knows what he is paying for.
Rachel, Hakim's colleague and also invented, opened an account with an international broker because a forum said it was the cheapest. She later noticed that her account agreement named a company she had never heard of, in a country she had never visited. When she did the comparison, her broker was cheap on every cost row. Her shares were held by a US custodian through an entity licensed outside Singapore. She did not have to switch either, and she now knows what she is paying for.
Take your figures from each broker's own fee schedule and account agreement. Do not use comparison sites or referral posts. Fees and services change often, so what you collect is a snapshot of the day you checked.
For the activity, put one broker of each type side by side in your grid. Pick ones you could realistically use, and fill in all five rows for each. When the website does not answer a question, leave the cell blank with a question mark. A blank is useful information about the broker.
Pick one broker of each type you could use and set them side by side in three columns. For each, fill in custody, licensing entity, commission and how it converts FX.
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