MPF price war heats up: fees don’t track returns, ECA earliest in Q3 next year

Bracing for the Employee Choice Arrangement, Hong Kong’s MPF industry launched a fresh fee-cut wave. On 10 November 2011, BCT and Fidelity held cut-price press conferences within hours of each other; BCT’s Ka Shi Lau promised more cuts to come, with the real battle only starting when the ECA landed — though she doubted the industry would slash much deeper.

MPF fund expense ratios: what did the price war reveal?

The MPFA was pressing trustees to streamline administration to cut fees further; over the past three years, MPF’s average fund expense ratio had already fallen more than 10%. BCT’s average FER was 1.52%, below the market average of 1.78%. Lau flagged that passively managed funds already charged under 1% with little room left — future cuts would target actively managed funds.

Fees don’t track returns: HSBC 3.35% vs AIA 0.24%

MPFA data showed management fees varied wildly between trustees — and bore no relation to returns. Take global equity funds: HSBC charged 3.35%, AIA just 0.24%. Contributing HK$2,000 a month (HK$24,000 a year), the HSBC balance came to only HK$22,238 (a HK$1,762 loss, -7%) versus AIA’s HK$1,089 loss (-4.54%) — the fee gap eating directly into balances.

ECA timetable: earliest Q3 next year

The ECA, once hoped for early 2011, was halted by the MPFA; Lau saw Q3 2012 as the earliest launch, since the intermediary-regulation bill had to pass LegCo by June. Trustees were soft-selling too: Sun Life upgraded its free comparison site covering all 523 Hong Kong MPF funds, while BEA dangled fund-unit rewards for preserved-account transfers over HK$10,000.

30% may switch: advisers may unleash a sales wave

陸劍平 cited surveys showing about 30% of members would consider switching trustees; a Convoy executive warned the ECA’s early days would bring an adviser sales blitz and a round of churn before things settled. The ECA is both choice and sales pressure — members need independent comparison data more than ever. The MPF education hub teaches fee-versus-return comparison.