Self Wealth offer a flat rate brokerage of A$9.50 per trade regardless of size of transaction. In comparison, CommSec has a minimum of A$19.95 and then sizable trade would attract a 0.12% brokerage. The following table shows you the difference in brokerage you can expect between CommSec and SelfWwealth in various trade sizes.
| Size of Trade | CommSec | SelfWealth | Difference |
|---|---|---|---|
| $10k | $19.95 | $9.50 | $10.45 |
| $25k | $29.95 | $$9.50 | $20.45 |
| $50k | $60.00 | $9.50 | $50.50 |
| $100k | $120.00 | $9.50 | $110.50 |
As you can see, you can save quite a bit of brokerage! So what is the catch, I will cover that later!
Application for new account is so easy
I was able to open an account for our SMSF online without the need to submit any documents - physical or electronic. No certified trust deeds etc. They were able to verify details electronically over the web with the typical key identification numbers. The account was opened within 2 business days. I was impressed! For those people that have experience with SMSF, you know that sometimes you have to bring a filing cabinet of documents in order to even open up a bank account! And trying to get documents certified in this interesting time would be quite a hurdle!
Trading Limit on buying stock
SelfWealth provides no trading limit for its users. You have to have physical cash in the trading account before you can even place a buy order. As soon as you place the buy order, your available cash will be reduced.
On the other hand, CommSec provides all new users with $25k trading limit and then once you started investing, they will include your portfolio value in your trading limit. I was told once by CommSec that the trading limit is the sum of portfolio and cash balance multiplied by 2 and then add the $25k. So assuming you are holding a portfolio of $100k and no cash, you will be allowed to place order up to $225k. So very generous!
Why Trading limit matters
The obvious benefit of having a trading limit is that you can leave your cash in those higher yielding online interest savings account and only ever need to transfer cash into the settlement account when you have successfully executed a trade.
It used to mean a lot more when interest rates was higher. Back about 6 years ago, online interest rates for SMSF (as we all know SMSF get screwed for lower interest rates vs personal accounts) was like 3%+ and now it is like 1%+, so it does make this strategy less rewarding, but nevertheless, 1%+ is still better than either no interest with SelfWealth OR 0.15% with CommSec.
Transfer money into and out of SelfWealth
This is relatively straightforward. You should always use Bpay. As long as you do it before the daily Bpay cutoff time, then your money will arrive in SelfWealth in the next Business Day. You will get an email notification before trade open on ASX to advise you of the money received in your account. Transferring out would need to be done before 2PM and it can only go to one nominated account you set up when you open the account. The money will arrive in your nominated account the next business day. So no great mystery!
Money in SelfWealth is NOT guaranteed by Australian Government
One thing you need to be aware of is that any money left in SelfWealth is NOT guaranteed by the Australian Government whereas money in CommSec Cash Account is guaranteed up to A$250k. Although I think ... and I hope the money would be pretty safe as it is held in trust through ANZ Bank, but nevertheless, it is not guaranteed!
So who is really your broker?
It is interesting when I received the CHESS sponsor statement from ASX that the CHESS sponsor is OPENMARKETS Australia Limited. This is coming from OPENMAREKTS website ... "OpenMarkets is Australia's second largest retail stockbroker by volume and a leading provider of wholesale trading solutions powered by some of the most powerful trading, risk & operational technology available to the financial services community on the market."
So my guess is that SelfWealth is using OPENMARKET as the wholesaler to execute trades on behalf of their customers.
Premium Subscription
When you first join SelfWealth, they provide you with 90 days free membership to their premium subscription. After that, if you like to continue, it is A$20 per month. I must admit this is a very innovative concept and I don't profess to fully understand their offer.
On the surface, it allows you to peek into other SelfWealth Investors portfolio and compare your portfolio performance with others.
For example, you can look at the top 10% return portfolio and see what makes up their portfolio. Obviously privacy is protected as everyone use a pseudonym and you can only see the portfolio in % and not dollars. I found this interesting as it does generate some fun by invoking the competitive spirits in all of us! No one want to be classified into the bottom 10% - so maybe it is a bit of a two edge sword for SelfWealth as no one like to be reminded they are bottom performers everytime they log in!
Opportunity Costs of using SelfWealth
By now, you would have realised that what you get in cheaper brokerage is offset somewhat by interests foregone in your CASH balance. So is it still worth it?
It depends! Depends on how often you trade, your average trade size and how much cash you typically left in SelfWealth Cash account. The following table gives you some idea but your situation could be very different.
Table - Net savings using SelfWealth
| Low Value Trader | Med Value Trader | High Value Trader | |
|---|---|---|---|
| Trade Size | $5k | $20k | $100k |
| No of trades per month | 5 | 5 | 5 |
| CommSec Brokerage | $99.75 | $149.75 | $600.00 |
| SelfWealth Brokerage | $47.50 | $47.50 | $47.50 |
| Brokerage Saved | $52.25 | $102.25 | $552.50 |
| CASH Balance (2 X trade size) | $10,000 | $40,000 | $200,000 |
| Interests foregone (@ 1%) | $8.33 | $33.33 | $166.67 |
| Net savings | $43.92 | $68.92 | $385.83 |
The long and the short is that, the larger your trade, the more savings you will make. And what the table doesn't show is that the more frequent you trade, the more savings.
To maximise savings, keep a watch on your CASH balance to ensure they are in proportion to your trade sizes.
Would I recommend SelfWealth
Yes! They save you money. They are fairly innovative. They provide services (although come at a cost) that other brokers don't provide. Obviously a lot of people think that way as their market share is increasing! My only advice is to watch that CASH balance and don't let it get out of kilter!
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