[Broker Choice] Thought on Schwab?

Investing / Brokers
1

Hello all,

I’m new around here and looking to start my investing journey.

To do so I’d like your opinion on Schwab as my online broker.
I read theses two articles:

So my questions are:

  1. Is there a fundamental reason I’m missing as to why I rarely see Schwab mentioned in comparison of online brokers for swiss etf-investors ?

  2. Is it a good/valid idea to try to build a 3-fund portfolio from comission-free ETF ? (I was looking at the boglehead wiki)

Thanks for your help !

PS: If some experience mustachians want to have a look at Schwab’s pricing guide here it is

2

I don’t know much about Schwab, but looking at their pricing guide, i will be very cautious of currency conversion.
I guess that your money is in CHF, and I also guess (but i may be wrong) that Schwab’s ETFs are mostly in USD.
Then looking at page 13, you will have to pay 2% fees(1% when you buy and 1% when you sell) for the currency conversion, plus all the other fees. A Fx spread that large would be a red flag for me.

1 Like
3

Thanks for the feedback Julianek.

It seemed a bit excessive indeed so I contacted them directly, and from the response I learn two things:

  1. As a Swiss (or UK) citizen you’ll need to open an “Schwab One International” account from their uk website.
    - Note that this account require a minimum deposit of 25’000$ so there is that.
  2. The 1% fees mentioned in page 13 are only there if you trade currency / hold foreign currency in your account.

For reference, the verbatim response regarding wiring fees:

So except for the “our bank’s conversion rate” which I’m not sure how to understand, isn’t Schwab better “bangs for bucks” that Interactive Broker (in my case) ?

4

It means Schwab and their associated bank take a hidden commission above the FOREX market rates.
Maybe it’s very small and they are very close to the FOREX realtime rates but it’s better to ask them before with few historical examples. I find conversion rates less transparent than a commission based conversion.

Also they want 25 USD whenever you wire money out.

My personal plan is to max out my Interactive Broker account for USD investments and to leverage low FOREX fees.
From there I’d like then to progressively diversify to brokers such as Schwab that have commission free ETFs.

Schwab provides a Visa debit card which you may see as an advantage if you need to spend in USD, otherwise you again get hit by conversion rates towards CHF/GBP or EUR.

1 Like
5

Instead of wire money out, you can use the free debit card provided.

I would like to move from Swissquote to Vanguard in the future. I’m still looking if I would need to pay tax in U.S with a U.S account. As for now, the only tax which would apply is the estate tax.

The main advantage of Schwab is no fee when investing in their ETFs. Schwab’s ETFs have as low or lower TER in comparison to Vanguard.
They also have an U.K. entity, so you don’t need to make an expensive wire transfer from Switzerland to U.S, a SEPA wire transfer is enough. This possibility is not offerd by tdameritrade.

The main disadvantage is even if you are opening your account with Schwab UK, your account is based in US. You could end up paying the estate tax above 60000$ if you die.

6

This guide https://www.schwab.com/public/file/P-1036363/Pricing_Guide_IS_7.2016_REG23060-29.pdf seems to be for U.S brokerage account not international one.

Be careful, if you are Swiss, you need to open your account through http://www.schwab.co.uk/ which could have different conditions in comparison to international account.

Based on this page http://www.schwab.co.uk/public/schwab-uk-en/pricing-and-services/wire-transfers, “We accept wired deposits in foreign currency and automatically convert them to U.S. dollars with no wire acceptance fees2. We can also wire money from your Schwab account to the wire-receiving institution of your choice so you can use funds to make purchases or investments in local currencies.”, the currency is converted at the deposit, not when buying or selling