Premise of this question is because I am interested in how Endowus Unique selling point to provide lower fees through funds that do not charge broker commissions. However, the broker free commission fund structure is confusing because the rebate element provided by these funds are confusing.
26 Aug 2020
Chief Investment Officer at Endowus
Thank you for your question. The reason our overall cost of investing is lower is because we have removed the costs at every layer possible. The reason Dimensional fees are lower is because 1) we access the institutional share class of the funds. and 2) These institutional share class funds have no trailer fees - the commissions paid by the fund manager to the distributors (banks like DBS, brokers or fund platforms like FSM/Dollardex, or FAs). Broker commissions are charged by the platform, broker or bank that you use to buy funds. The distribution commission is paid continuously as long as an investor holds the funds and usually ranges between 0.5% - 1% per annum, or greater than 50% of the fund-level fees. This potentially leads to misalignment of incentives between an investor and distributor, and higher fund-level fees. At Endowus, we try to use the institutional share classes of funds whenever possible, which do not have any trailer fees. If we have to use the retail share class funds, we will rebate any trailer fees received from the fund managers 100% back to our clients. We strongly believe in not accepting trailer fees as we want to stay independent and aligned to the client's best interest and completely focused on building the best portfolios for you rather than selling you products that pay us the highest fees.
It is not so much a question of brokerage fees, that are anyway low today
Endowus uses in aggregate:
Dimensional Pacific Basin Small Companies Fund
Dimensional Global Core Fixed Income Fund
Dimensional World Equity Fund
Eastspring Singapore Select Bond Fund
First State Dividend Advantage Legg Mason
Western Asset Global Bond Fund
Lion Global Infinity US 500 Stock Index Fund
Lion Global Infinity Global Stock Index Fund
Natixis Harris Associates Global Equity Fund
PIMCO GIS Global Bond Fund
PIMCO GIS Income Fund
PIMCO Emerging Markets Bond Fund
PIMCO Global Real Return Fund Schroders
up to 1.70 % annually.
Mostly a passive indexing ETF DIY approach could be more successful.
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Endowus Cash Investments Portfolio
0.25% to 0.60%
ANNUAL MANAGEMENT FEE
EXPECTED ANNUAL RETURN
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