A guide to switching MPF providers: risk first, returns second

This article is a rewrite of a report from July 2012.

With semi-portability coming, the first step in switching MPF providers is not asking which firm is best — it is asking yourself: what is your risk tolerance? Follow this sequence and choosing gets easy.

Step one: know yourself

Identify the fund category that fits, then shortlist schemes offering it. Schemes differ hugely in fund count and style: some lean toward high-risk equities, which will not suit conservative members — do not go by reputation alone. Risk tolerance changes (nearing retirement, say), so check a scheme’s range is broad enough, or be ready to move again.

What about the hands-off?

There are “lazy funds”. If you would rather not tinker, these auto-adjust the equity-bond mix by investment horizon across life stages. Active managers should check a scheme’s asset-class and regional breadth instead.

How do you compare MPF fees?

Look at the total expense ratio — small numbers compound. The adage runs “risk and return” — risk first, returns second; never chase past performance while ignoring risk (and past performance guarantees nothing). The MPFA’s fee comparison platform is the direct route, with the fund’s total expense ratio the key long-term drag. Finally, weigh service: switching times, online services, mobile apps.