FSMOne hidden fees in RSP?
Investment Personal Finance

Is it really worth it to RSP into the VT ETF with FSMOne?

FSMOne has been touted as one of the cheapest ways to RSP into ETF products. I’ve even written my review on the brokerage a few weeks back so if you’re interested you can read it here.

Although it is cheaper to use its RSP product for SGX ETFs as compared to other RSP providers, what about its international offerings? After months of usage, I’ve noticed there are hidden fees within this product that might eat into your returns.

In this post, I’ll deep-dive and do my calculations to decide if it’s still worth using FSMOne’s RSP product for my DCA investments. We will mainly focus on the S&P 500 and US ETF options. There aren’t any known hidden fees involved with their SGX and HK ETF products.

What are the hidden fees

Source: fsmone.com

To purchase US ETFs such as IVV or VT, it will cost US$1 per transaction. We’ve got to agree that the price for buying in is really cheap. However, it’s the rest of the pricing that might be a cause of concern for many passive investors.

The first big number that you’ll see is the US$50 that’s charged for voluntary corporate action. For an ETF, this is actually very unlikely to happen. Rights Issues and general offers generally only happen for single stocks. If the underlying company that the ETF tracks has a corporate action, the fund will take care of it and that will not impact you as the ETF investor. Therefore, we can largely ignore this pricing.

Lets analyse the dividend handling fees and how it’ll impact our earnings.

Dividend Fees

To begin, we have to first know that all US-domiciled stocks and ETFs have a 30% tax withholding fee for Singaporeans. So in the case of VT which gives out a 1.71% dividend yield, it’s effectively 1.19% for Singaporean investors.

On top of that, FSMOne also charges a minimum fee of US$2.50 for every dividend handling. As most US stocks distribute dividends every quarter, we are effectively charged an additional US$10 every year from our dividends. Note that this US$2.50 is deducted after the tax withholding. After tax withholding, if your dividend is less than US$2.50, then you won’t get any dividends distributed to your account.

Working backwards, for investors of VT using a stock price of $77.46 and yield of 1.71%, assuming the distribution is equal throughout the year, you’ll need to have $835.08 invested in VT to even beginning receiving any dividends. For any investments less than $835, you’re effectively paying an additional 1.2% in fees for your investments. I think that’s a really expensively fee.

Of course as your holdings in VT increases, this US$2.50 fee becomes less significant. To reach the minimum US$2.50, you’ll need to have invested US$20885.5. At that point, this cost would have been an insignificant 0.04%.

My thoughts

After all the numbers crunching, I’ve come to the conclusion that it will only make sense to invest with FSMOne’s RSP product if my portfolio is large or the dividends I’m receiving is high enough. At an additional 1.2% fees, this would have been prohibitively expensive to me to use.

Even though passive investing is supposed to be hassle-free, sometimes we should do some calculations to ensure that we are not overpaying for our investments. Over the long term, these seemingly small fees can eat into our earnings significantly.

8 thoughts on “Is it really worth it to RSP into the VT ETF with FSMOne?

    1. Hi Bruce,
      Yes, definitely. If you build up a sizeable portfolio of VT etf over 20 years, then the costs would be really insignificant. The expense ratio of VT itself is really low as well. What you’re paying here is basically just the convenience FSMOne provides.

  1. Hi, what are your thoughts on Vanguard VOO SP500 etf via RSP plan?
    I am planning to invest $500 monthly.

    How would the hidden fees work out?

    1. Hi glen,
      let’s look at the math here for doing this RSP for the first year. Subsequent years get more complicated to calculate due to the many fee structures involved.
      Expense Ratio of VOO: 0.03%
      FSMOne FX Spread ~0.5%
      Dividend fees (30% withholding tax + FSMOne dividend handling fee): US$10 first year ~ 0.22%
      FSMOne Purchase fee: US$12 first year ~ 0.27%

      Essentially, for the first year of doing this RSP you’re paying about 1.02% in fees which is really not bad. This % number will only go down as the dividend fees and RSP purchase fees are fixed at US$22 a year. I believe this is still a much cheaper rate than what many roboadvisors are charging.

      Hope this helps you in making your decision!

  2. Hi there,
    Thank you so much for this commentary! It was really helpful. I have two questions:

    1) If FSMOne doesn’t cut it in some respects, what would you say is the best brokerage with the lowest fees to invest regularly in for US and other international ETFs? My greatest challenge has been finding one that is worthwhile the investment + offers a good variety of ETFs to pick from (FSMOne RSP’s is quite limited). I intend to invest about $600/mth separated across 2-3 ETFs for now, which is about $200-300/ETF. I have not made any investments yet.

    2) How did you calculate the additional 1.2% fee and that you’d need $853.08 to even beginning receiving dividends from the info you had (stock price of $77.46 and yield of 1.71% – or 1.19% due to the tax)? I know it’s simple arithmetic but this is all new to me I’m trying to learn how to calculate these things myself.

    Thank you!

    1. Hi Victoria,
      Thank you for the wonderful words and sorry for the late reply.

      1) I will highly recommend using Firstrade for regular investments into ETFs / Stocks. Although it has its caveats (such as the overseas wire fees for withdrawal and not having a Singapore physical address), I still think it is a great brokerage to use. There’s also a lot of manual work involved, though you can save significantly on some fees. You can read more about my review of the brokerage here.

      2) Yup! $835 * 0.0119 = $9.93. This is the supposed amount of interest you’ll get from your VT holdings minus tax withholdings. Because of the US$2.50 every tax withholding, you’ll need to receive > US$10 in dividends from your holdings.

      Hope this helps!

  3. Hi! There are many ETFs tracking the S&P 500 locally and overseas e.g. VOO & Infinity 500 US fund SGD by Lion Global. Popular ETF e.g. VOO is costly whereas Infinity 500 is cheaper.
    Does the share price of an ETF matter?
    Is it true the value of the ETF’s underlying index that should determine the performance of an ETF, not supply and demand for its shares?
    Is it true different prices are nothing to worry about among ETFs tracking the same index because they do not contain important performance-related information?
    Do lower prices enable me to invest more efficiently and to fine-tune my portfolio management?
    I intend to DCA $1000 monthly or quarterly for the long term with dividends being reinvested.

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