CDP Account vs Custodian Account
- SHB
- Nov 11, 2019
- 2 min read
When we invest, we do not actually hold the assets, the money we invested will require a financial body to hold our investments. It is the same analogy of saving your money in a bank, in which, you own the money but the bank hold for you.
Today i will go through 2 very familiar terms to all investors, regardless of experience, which is CDP Account and Custodial Account. Either which allows you to hold your investments assets.
CDP Account
The Central Depository (CDP) account is wholly managed by Singapore Exchange (SGX). If you are investing in any SGX-listed stocks or bonds, we can store them in a CDP account and per user can only open 1 CDP account.
To sum up, CDP Account provides an integrated clearing, settlement and depository avenue for customers in the Singapore Securities Market. And stocks are purchased under your name which means you are the legal owner of the stocks.
Pros:
Easy to open
Free-of-charge
No maintenance fee
Cons:
Clearing fee: 0.0325%
SGX Trading fee: 0.0075%
CDP charges brokerage firms with brokerage fees.
To open your CDP Account, i had compiled a step by step to help you open in my older post.
Alternatively, you can check out a post from a very popular local finance blog, Dollars and Sense.
Custodian Account
Custodian Accounts are managed by financial institutions that holds securities on our behalf. It means when we open a custodian account with a financial institute, the stocks we purchase will not be under our name, instead it will be under that particular institute's name.
Investors who trade overseas assets or those using Robo-Advisory platforms will be using those accounts.
Pros:
Lower brokerage fees as CDP do not charge brokerage firms with brokerage fees, the firm buys with their own name.
Overseas market trading will be easier as you will not need multiple country's local depository account.
Cons:
Stocks are not purchased under your name, therefore, you are not a shareholder. Thus, forfeiting a shareholder's right to vote, to attend AGMs or receive annual reports.
Custody fee.
Transfer of shares from your custodian account to another depository account will incur transfer fee.
I personally think that Seedly has done a fantastic job in compiling a huge data on fees for CDP users and fees for Custodian users. I will link this fantastic blog link here so please do check out!
Another investment platform one may use which involves custodian account is Robo-Advisory platform. Below, i will put up a small table which shows some of the more prominent Robo-Advisory platforms and their custodian accounts.
To Conclude
If you are just looking to invest in Singapore Market, look no further as CDP Account is the best option available. If you are looking to invest in overseas market or using Robo-Advisory platforms, make sure you do your own diligent research on the custodian account the firms are using and also check all the fees incur.
Have a nice investing journey ahead!
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