"Transaction Fees 10 Times Higher": Key Precautions for ETF Investors

FSS Highlights Key Consumer Precautions for ETF Investments
Based on Major Complaint Cases

Mr. A, who opened a pension savings account at a securities firm branch and has been trading exchange-traded funds (ETFs) through the firm's application for five years, recently discovered that his transaction fees were about 10 times higher compared to accounts opened online. Mr. B invested in ETFs via a specific money trust but was not informed by a bank branch employee that additional trust fees would apply.

These are representative cases of financial complaints recently filed with the Financial Supervisory Service (FSS), as the ETF market has seen rapid growth.

On May 21, the FSS released a document titled "Consumer Precautions for ETF Investments: Key Complaint Cases," which provides guidance on points to note when investing in ETFs, including ▲ETF fees ▲pension savings account fees ▲investment products ▲timing of transactions ▲and auto-sell services.

Firstly, when investing in ETFs through specific money trusts, in addition to transaction fees at around 0.1%, investors may also incur trust fees (ranging from 0.03% to 2.0%) and early redemption fees (ranging from 0.0% to 1.0%). These additional fees can result in the actual ETF yield being lower than the originally targeted yield.

It is also important to note that if you open a pension savings account at a branch, rather than online via a website or application, your ETF transaction fees may be relatively higher. According to the FSS, for accounts opened online and traded through HTS or MTS, transaction fees were between 0.01% and 0.015%. In contrast, for accounts opened at a branch and traded through HTS or MTS, the fees were between 0.1% and 0.2%. When trading directly at a branch, the fees reached 0.4% to 0.5%. An FSS official emphasized, "When investing in ETFs through a pension savings account, you must check the transaction fees in advance."

Another point to consider is that the range of ETF products sold by banks is more limited than those offered by securities firms, and the selection may differ from bank to bank. Before transferring an Individual Savings Account (ISA), you should check in advance whether the bank offers the ETF products you intend to purchase.

Mr. C, who had been investing in ETFs through a brokerage-type ISA account at a securities firm, closed the account and opened a bank trust-type ISA account at the suggestion of a bank employee. However, he was unable to purchase the same ETFs with the new account and subsequently filed a complaint. In the case of trust-type ISAs managed by banks, ETF trades are entrusted to the bank, meaning only ETFs designated by the bank can be traded. In contrast, a brokerage-type ISA at a securities firm allows customers to trade ETFs directly and access all listed domestic ETF products.

Additionally, unlike securities firms, banks cannot offer real-time ETF trading. Therefore, customers must confirm the actual timing of ETF transactions prior to signing an agreement. According to the interpretation of the Financial Services Commission's regulations, ETF brokerage operations fall under the brokerage of listed securities and are not included in the scope of collective investment securities brokerage permitted for banks. As a result, banks must process customer ETF buy and sell orders through partnered securities firms, making real-time trading difficult. Each bank's ETF trading hours for buying and selling can be found on their respective websites, applications, and product brochures.

Finally, when investing in ETFs through specific money trusts, it is critical to check in advance whether you have enrolled in an auto-sell service and to confirm your target yield. Recently, the FSS has received complaints such as bank branch employees arbitrarily setting the target yield for the auto-sell service when investing in ETFs, and customers not understanding why the actual yield was lower than the target yield. An FSS official advised, "ETF specific money trusts are more suitable for long-term investment than for short-term speculation, so it is advisable to set your target yield by considering your investment style, asset allocation, and the risks associated with the selected ETF products."

This content was produced with the assistance of AI translation services.