How to Choose an MPF Trustee? Principal: Service Matters as Much as Fees

With the MPF Employee Choice Arrangement expected in November 2012, employees would soon be free to choose their own trustee for their contribution portion. Principal Financial Group Hong Kong CEO made a point at the time that still resonates: when choosing an MPF trustee, don’t decide on fund fees alone — weigh fund performance, fund range, customer service and the trustee’s soundness together.

What should you look at beyond fees when choosing an MPF trustee?

Beyond fund fees, choosing an MPF trustee means assessing four things: whether fund performance is consistent, whether the fund range is broad enough for different risk appetites, whether customer service is up to par, and whether the trustee itself is sound and reliable. Cheap fees paired with poor service and narrow choice won’t get you to the retirement you want.

Focused on MPF: Principal’s positioning

Principal’s pitch was focus: since MPF launched in 2000 the company had concentrated on MPF services without branching into other financial businesses, allowing it to respond to market and member needs promptly. At the time it offered 3 MPF schemes with 25 funds, letting members build portfolios to match their investment preferences and risk tolerance.

On fees, Principal revised the fee structures of its MPF Scheme 600 and 800 Series to improve overall cost-effectiveness and cut operating costs, stressing the change would not cost existing members extra fund management fees. On performance, it had won Lipper Hong Kong fund awards six years running.

Customer service: the overlooked criterion

While rivals talked fee cuts in the pre-launch price war, Principal put its chips on customer service:

• 24-hour retirement hotline, e-newsletters, seminars and member privileges;
• An interactive online system for switching funds, changing investment mandates and checking account details, fund prices and performance any time;
• Close client relationships to help members manage their MPF accounts with confidence.

This looked prescient — once the Employee Choice Arrangement took effect and members had to manage their own accounts, a usable online platform and solid client support proved worth at least as much as low fees.

A reminder for employees

Whichever trustee catches your eye, do three things before choosing: compare fund expense ratios (FER) — not just management fees — across same-type funds; check the fund line-up covers the risk levels you need; and try the online platform yourself to see if it feels smooth. For a first look at what’s on the market, start with mpf.hk’s fund browser.