Wow, the recent talk of the town seems to be Chocolate Finance. Recently, I kept receiving Wat's App messages from friends or seeing online posts with regard to the super attractive S$20K guaranteed 4.2% interest income product by Chocolate Finance. To be honest, the old adage of if something sounds too good to be true, then it probably is. Personally, I am staying far far away from Chocolate Finance due to the following reasons:
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| Guarantee by Chocolate Finance Mgt Team |
1. Product doomed for failure in event of sudden global interest rate drop to fight recession
I think that it is very irresponsible for financial product designer these days to use "guaranteed high interest rate" for a certain duration to attract investments. No matter what, there is still a lead time between actual collection of funds from investment subscription to deployment into the various auv-component funds constituting Chocolate Finance latest product offering. If interest rates were to suddenly plunge, Chocolate Finance will be dipping into its shareholder fund to compensate investors. Where got business take on excessive risk like that?
2. It is a fallacy that many folks believe that as long as the legal title of their investments is being held by 3rd party custodian, this means that one's money is safe even if Chocolate Finance goes bankrupt.
The thing is that if Chocolate Finance business model collapses, investors will no longer be able to withdraw their funds immediately. During the chaos transition while regulator take-over, there maybe loss of electronic records from system, or even fraudulent collusion by senior management and their IT team in sending of electronic records to the custodian that is holding on to all assets separately as required by the Monetary Authority of Singapore ("MAS"). I can easily think of a few more scenarios that may happen to cause months of delay in ascertaining ownership of respective individual's investments as well as the completeness of records.
Point number 2 actually also applies for other robo advisory platforms such as Endowus. But difference here is the strength of the shareholders of Endowus relative to Chocolate Finance. Endowus shareholders include UBS, MUFG, Singtel, Samsung, Prosus (largest shareholder of Tencent) and Softbank etc.
3. The guarantee is only for up to S$20K and until 31 December 2024.
It is a waste of time and efforts to move funds whenever another Fund Management Company come out with same pattern as Chocolate Finance to call itself having the best deal in town. I will rather spend the time concentrating on my career or spending time with my family. There are already many good products out there on Endowus (Cash Smart) ,MooMoo or Tiger Brokers that have good decent money market funds offering 3.5% to 4.6% return per annum and being able to withdraw on demand. It does not make sense for one to keep going after a newer product that professes to be the "best" in the market for a 4.2% return that is not much of a difference to other similar products in the market.
Parting thoughts
Anyway, above are just my personal thoughts and views. This is a free world. For those who likes the thrill of constantly shifting their cash around for a better deal, do go for it! :)
