Why is the fund switching process on IDECO so slow?
The system only accepts orders at its cut-off point at midnight, so in the case of a domestic fund, you "place" an order before midnight and it fixes the price at the end of trading at 3pm the next day. In my non-IDECO account, I can place an order for a domestic fund right up to the 3pm cut-off point, and get the NAV based on that 3pm closing price, correct?
The buy order in this switching process takes even longer: another three trading days! I am not sure if this is specific to SBI Benefits Systems or IDECO in general. Support did not offer any explanation why it takes so much longer than for non-IDECO transactions.
Domestic fund A
20 August: sell order "received" by system before midnight cut-off
21 August: price fixed, presumably after 3pm, 15 hours-plus after order was placed
26 August: I “receive” the fund
27 August: fund appears on the website at 4:00 am
Domestic fund B
20 August: buy order "received" by system before midnight cut-off
26 August: price fixed, presumably after 3pm, three trading days after the Fund A order!
27 August: I “receive” the fund
28 August: fund appears on the website at 4:00 am
by GachaponPon
2 comments
that’s ideco. everything is slow
It’s mostly because iDeCo accounts are not actually managed by brokerages (e.g., SBI Securities), and SBI Benefit Systems is merely one of the four approved “record-keeping institutions” (i.e., they don’t manage the account either).
All iDeCo accounts are ultimately managed by the [NPFA](https://www.npfa.or.jp/), who deposit iDeCo assets with various trust banks. So when you give an instruction to a record-keeping institution, the instruction has to be communicated to and processed by the NPFA, who then has to communicate it to the relevant trust bank, and then the whole confirmation process has to happen in reverse.
The reason for this structure is that the safeguarding of iDeCo assets and records is considered to be significantly more important than for regular assets (e.g., assets in your non-iDeCo accounts at SBI Securities), because they are intended to fund the account-holder’s retirement. By making the NPFA responsible for managing the accounts, the government is effectively taking responsibility for securing the assets and records, in a way that the government doesn’t do for regular brokerage accounts.
There is also an assumption that—considering the long time period associated with iDeCo—brokerages might close down and new brokerages might open, so having the government manage the accounts gives them more stability/continuity.
Since iDeCo is intended to be used for long-term investing, I don’t think the time lags associated with the additional record-keeping/processing tasks are considered significant.