Custodian Fee for Foreign Market Shares

Q&ACategory: QuestionsCustodian Fee for Foreign Market Shares
Simon asked 4 years ago

Hi PC,
I have attended the usual stock picks webinar session which ended moment ago. I have raised a miscellaneous question during the webinar session but somehow didn’t get to answer by you, could be overlooked by the host, KC Lau…?
Based on my understanding, foreign market shares will be hold by brokerage firms or banks on behalf of retail investors, instead of local CDP account.
Besides those brokerage/admin charges, will there be any other charges? for example, any “custodian” fee per counter per month? If the answer is yes, this will definitely “eat” into my return, because retail investors like me are usually having very limited capital and will always trying to save my return as much as possible.
Would like to know your suggestion or any useful advice on how to deal with it?

5 Answers
pcwong Staff answered 4 years ago

So far I have not encountered any custodian fees except for those that are listed as ADR (American Depository Receipt) which is negotiable certificate issued by a U.S. bank representing a specified number of shares (or one share) in a foreign stock traded on a U.S. exchange.

So you need to be careful when purchasing shares which are listed as ADRs.
Here’s the link how ADRs work http://www.otcmarkets.com/learn/american-depositary-receipts
Here’s an example of an ADR share . Note the ADR in brackets.
https://www.google.com/finance?q=NYSE%3ADANG&ei=QTjSV4GLJs-ougSWmQQ 
Hope this helps.
 

pcwong Staff answered 4 years ago

Also, the custody fees for ADRs are recurring and not one time off. 

pcwong Staff answered 4 years ago

I do trade using UOB Kay Hian Singapore, they do charge S$2 per company per month unless there is a minimum 2 trades made in the month. The fee per company for that month is then waived.. It depends also on the brokerage you use. I don’t get any monthly charges for HL Investment Bank except for the ADRs

Simon answered 4 years ago

Hi PC,
Thanks for your answer and noted on the HL Investment Bank don’t have the “custodian” fee.
On the other hand, I believe you ever come across on this brokerage firm – Interactive Broker (IB), it’s an American firm. Compare with other brokerage firms or banks, IB brokerage charges are extremely low.
Have you consider to use IB as your brokerage firm to trade foreign market shares? would like to know your personal view and opinion on this? please elaborate Why or Why Not? Thanks in advance.

pcwong Staff answered 4 years ago

It the person’s choice. IB is cheaper. There are pro and cons. The main thing is the legal boundaries when it comes to a person’s will. A will drafted in Malaysia is bound by Malaysian law but will have little jurisdiction over overseas assets as you will still require the services of and international based law firm or the services of a foreign law firm at where your assets are based. This could be costly.
The other is the movement of funds which require a minimum deposit. I have checked with Saxo bank and IB before and both require a minimum of US$10K as deposit. So I prefer movement of small amount where I pay only when I trade. So the local brokerage meets this purpose. Of course, looking back I could have saved quite a lot of thousands RM if I had used IB.
I used UOB KH Singapore because I happen to have a bank account there.
At the end is really your personal choice. 
Hope it helps clarify matters.