Index Funds Have the Most Room to Cut MPF Fees, Says Convoy

HSBC’s decision to cut management fees on some MPF schemes from next month has put the market on fee-cut watch. Convoy Financial Services’ MPF business development director Chung Kin-keung says the move piles price pressure on small and mid-sized operators — and passive index-tracking funds have the most room to follow, a natural starting point for any MPF fund fees comparison.

Why do index funds have the most room to cut?

Because they do not pay for active stock-picking, so their cost base is structurally lower. Unlike actively managed funds, index trackers simply buy and sell in line with index weights — no expensive research teams, no star-manager salaries. That is why their charges have always been lower, and why Chung believes they have the biggest scope to cut further. If smaller operators do not follow HSBC’s lead, they risk losing clients once the Employee Choice Arrangement lets members vote with their feet.

What else can operators do besides cutting fees?

They can compete on digital service and fund choice. Chung suggests operators use electronic platforms — online account management, SMS alerts — to lift service quality and make it easier for members to track their MPF. Offering a wider range of funds also helps members with different risk appetites find something suitable. As fee competition intensifies, service quality and choice may be how smaller players keep their clients.

What does HSBC’s cut mean for members?

When the market leader cuts, the industry usually follows — good news for workers in the long run. HSBC’s fee moves have always been a bellwether. With members soon free to switch providers under the Employee Choice Arrangement, rivals will find it hard not to match. Lower fees compound over decades, so every cut today means a bigger retirement pot tomorrow.

To compare charges and returns across MPF funds, visit MPF fund comparison.