Like a gold-plated fork?
I saw MYDC in one of THEO‘s newsletters recently. They are either a spin off or a collaborator.
The premise is similar to THEO’s. They take something complicated that people don’t want to think about (in this case, their iDeCo account) and make it easy to sign up for and administer.
This is good because most people 1) haven’t heard of iDeCo, 2) don’t understand it, and 3) don’t care to learn enough to do it themselves.
MYDC looks pretty good. The sign-up process seems easy (and if it’s half as good as THEO’s it will be far superior to the competition -I’m looking at you, Rakuten, with your months of waiting).
Once you have the account, they use THEO to manage the portfolio.
It’s a simple and easy solution you can point people to.
Here’s the catch, of course. The 2,777 is standard across all providers, but that monthly fee is quite high (you can see the comparison here, the lowest is currently 167 yen a month).
Fund costs of 0.432% is not terrible, but it’s quite a bit more than the cheapest passive funds offered by some providers.
Now, I think THEO makes a lot of sense. They charge 1% of assets a year as a fee, but this includes all transaction fees and they do tax-loss harvesting, which means that even though I made 19% last year, none of the gains are taxable. They also handle everything for you, from asset allocation to rebalancing.
I’m not sure MYDC provides as much value. After all, the lowest-cost iDeCo accounts also include transaction fees, and automatically buy your desired allocation. They provide the same tax benefits, and it is relatively simple to choose your asset allocation and decide on funds.
The extra cost of MYDC compared to SBI, Suruga, or Rakuten is probably not worth it in my opinion.
However, if the choice is to open a MYDC account or not bother with iDeCo at all, then it’s a no-brainer. The tax benefits are big enough for most people to make this both free money and enforced saving for retirement. Win-win.
How is everyone doing with iDeCo? My application with Rakuten is proceeding at a snail’s pace… hopefully my account will be open at some point this year 😉
Call me a cynic (from all these years working in the finance industry), but MYDC does not seem to be providing any kind of value added service here compared to its competitors.
From what I was able to glean purely from their website, it seems that MYDC is providing a wrap account service. For the consumer, this means a grand total of 1.432% annually inclusive of THEO’s management fees – easily much higher than actively managed funds available on the market. Caveat emptor.
Regardless of signing up with either MYDC, brokerages or banks, the main waiting time is due to the government performing background checks and due processes, which easily can span a month or so.
By the way, both THEO and MYDC are owned by the same parent company, which explains the integration of services.
Hi Desmond!
Are you sure customers would also be paying THEO’s 1%? I didn’t get that from the site and it would be a real game-changer if it is true.
The delays with Rakuten isn’t even the government at the moment, it’s them taking a week to do things like acknowledge receipt of documents, or 2+ weeks to send out application forms to new customers. I’m guessing demand is swamping them.
The cross-promotion makes a lot of sense if MYDC and THEO are owned by the same company 🙂
Hello Ben
It is the financial industry after all. Nothing ever comes for free.
Let’s send an email to MYDC so that they have a chance to provide a clear, concise answer.
And perhaps also to THEO as well, just so to make sure that their 1% is not on top of whatever their ETF selection already charges 🙂
You are a cynical man, Desmond!
But also an astute one. I just contacted both of them and we’ll see what they say 😉
Hi Desmond
THEO has replied (quick as ever). ETF running costs are deducted at source, and the THEO 1% fee is applied on top of that.
So the ‘real expense ratio’ for THEO is something like 1.2-1.4% a year.
というのが、ETFは、日々変動するその価格自体に、ETFの経費が含まれていますので、
別途、口座から引き落としているいるものではございません。
例えば、THEOでも組み込んでいる代表的な銘柄 VBR（米国の小型の割安株）について見てみます。
以下のサイトからも確認できますが、Expense Ratio (net) 0.08% とあります。
▼Yahoo! Finance
https://finance.yahoo.com/quote/VBR/?p=VBR
▼Morningstar
http://www.morningstar.com/etfs/ARCX/VBR/quote.html
THEOに組み込んでいる銘柄で平均すると、0.2～0.4% 程度となります。
Hello Ben
That is great information!
Now let’s wait for MYDC to formulate a response =)
Actually, they just emailed me.
The gist of it: they use THEO to create mutual funds for them. These funds have an annual fee of 0.432%.
The ETFs inside the mutual funds have their own fees (probably the same as THEO’s 0.2-0.4% or so.
THEOとMYDCで扱う商品の違いをご説明させていただきます。
ＥＴＦによる運用をいたしますが、MYDCで選べるTHEOは「THEO投信」であり、
いわゆる投資信託（ファンド）です。
・THEOグロース・ファンド
・THEOインカム・ファンド
・THEOリアルアセット・ファンド
※THEOのように、ETFの銘柄を株式のように一つ一つ保有することはできません。
MYDC個人型確定拠出年金のTHEO投信は、信託報酬が一律0.432%（年率）となります。
この信託報酬は運用上かかるコストとなり、この中に運用手数料が含まれております。
※購入時の販売手数料、売却時にかかる信託財産留保額のお手数料はかかりません。
ETFの経費については、ETF自体の価格に含まれているものであるため、
間接的にお客様が負担しているといえるものですが、別途徴収するものではありません。
1点ご留意いただきたい点は、THEO投信としてのいわゆる運用コストは信託報酬のみですが、
個人型確定拠出年金は口座管理手数料として月額458円（加入者）が別途かかります。
Wow, 0.432% annually for the benefits of index ETF investing AND automated tax loss harvesting (TLH).
Since Betterment estimates TLH to generate an additional 0.77% returns annually, it makes for a very compelling case to consider =)
Hi Desmond
I’m not sure MYDC does tax-loss harvesting, as iDeCo accounts are tax-free anyway.
Still not too bad, although I think my verdict remains the same: good for people who don’t want to think about it, anyone else should just open a normal iDeCo somewhere cheap and choose cheap passive funds 🙂
I learnt about MYDC in THEO’s newsletter as well. Being satisfied with THEO, I took at look at MYDC (although my company offers a J401k so it was just out of curiosity).
The fee is indeed high! However, my two cents is that THEO and MYDC (well, actually the parent company MONEY DESIGN) is still a young company dependent of externals investors (3, if I’m right).
With time and as the company grow, we should be able to expect lower fees (at least I hope so, because looking at the low-costs ETF they use (https://theo.blue/portfolio), we could expect lower costs).
They are targeting people who don’t want to have to think too much about all this stuff (not us! haha). Peace of mind (or laziness?) comes with a price (pun non intended).
Hi Alexandre
I email THEO every so often and ask them to lower the fees. They always send me a nice reply, but no reductions yet 😉
I’m impatient to see a blog post saying “I DID IT! THEO lowered its fee” 🙂
On a side note, WealthNavi lowers its fee at +3,000万円… This seems insane to me (and you still pay the different ETF fees).
Heh, someday.
THEO does the same: you only pay 0.5% on amounts over 30 million yen, but the full 1% on that first 30 million.
It would be nice to make it into the cheaper band 🙂
Not really interested in robo advisors, but that tax loss harvesting figure is impressive. I always assumed it wasn’t feleasible for a passive investor, as it requires selling as a loss and buying a similar investment . Since my strategy is just buy and hold a global stock ETF and a couple of bond ETFs, I can’t see how I could achieve that. I suppose I could find equivalent investments to swap between, bit that’s probably forbidden in tax rules, and I like the funds I’m already in.
Hi adamu
That’s exactly what they do: sell one ETF and buy another one with the same content.
I can’t be bothered to do this myself, but I appreciate them doing it in this account. In the long-term it could be very valuable.
I guess it’s impossible in a NISA, but would work in other accounts. My ETFs are all foreign too, so the reward would have to outweigh the fees, and temporary out of market risk. I could be tempted if there is a huge crash, but until then I’ll keep it simple. 🙂