The comparison is for UCITS ETFs not US domicile ETFs. That’s why he is saying it’s an advantage
This is not about 3a. It’s about Finpension wealth management service which is for private wealth
Thanks for sharing. I did not realize that you can actually have a lower TER by buying multiple ETFs versus buying one ETF.
I did not quite understand your effective fee calc, but I used your TER assumptions & got following numbers for effective yield. I did not account for buy/sell fees.
S&P 500 yield is assumed to be about 1.6% , so i used that for flat credit back. Lower yield will also reduce tax credit
Basically it turns out that SQ = Neon + custody fees (capped at 200 CHF per year)
FP will cost more
| World ETF portfolio | SQ | NEON | FP | |
|---|---|---|---|---|
| (a) | Gross dividend | 2% | 2% | 2% |
| (b) | Witholding tax (12.5% effective) | 0.25% | 0.25% | 0.25% |
| (c) | Net dividend (a - b) | 1.75% | 1.75% | 1.75% |
| (d) | TER | 0.15% | 0.15% | 0.085% |
| (e) | Custody fees + management fee | 0.10% | 0% | 0.39% |
| (f) | US TAX credit (assuming 67% exposure to S&P 500 & Gross dividend yield of 1.6% for US portion) | 0 | 0 | 0.161% |
| (g) | Deduction for 3rd party expenses | 0.30% | 0.30% | 0.30% |
| (h) | Taxable income (c - g + f) | 1.45% | 1.45% | 1.61% |
| Effective yield | ||||
| (i) | Tax @ rate 30% | 0.44% | 0.44% | 0.48% |
| Effective yield (c + f - d - e - i) | 1.07% | 1.17% | 0.95% | |
| (j) | Tax @ rate 40% | 0.58% | 0.58% | 0.64% |
| Effective yield (c +f -d - e- j) | 0.92% | 1.02% | 0.79% |
One time fees -: If i assume 5000 CHF investments at a time, then buy + sell fees for SQ will be 0.4% (assuming 10 CHF ETF leader fee per trade) and Neon will be 0.5% (only at time of sales)
FP I do not know if there is any spread or not. For higher amounts NEON might become expensive at withdrawal but would depend on investment horizon and withdrawal amount tranches.
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Current dividend yield of s&p 500 is more like 1.3%. But that of course is also a historic low, due to historically high valuations.
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Ahh. It further reduces the advantage of the credit 
Great overview, thanks.
Isn’t WHT 15% instead of 12.5%?
Actually it’s 15% if US was 100% of the portfolio.
But since world portfolio includes less US stocks, I used the average calculated by Dr PI sometime back. Here
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Ah OK. Got it. Average dividend yield for the S&P 500 over the last 4 years was 1.5% according to this table.
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I calculated fees with the following assumptions:
- 10 year investment
- 200k lump sum investment at the start
- 2500 monthly deposits
- 1.5% dividend yield for US
- values without a calculation have been done with the
FVformula - it’s likely the free savings plan offer from neon runs out when FWRA has reached a certain AUM threshold, so I included a variant including transaction costs
| finpension DM | finpension World | Swissquote | neon (savings plan) | neon (normal) | |
|---|---|---|---|---|---|
| Custody fees | CHF 13’803.83 | CHF 13’803.83 | 10 years × CHF 200 + 8.1% VAT = CHF 2’162 | 0 | 0 |
| TER | CHF 2’623.06 | CHF 2’973.93 | CHF 5’261.04 | CHF 5’261.04 | CHF 5’261.04 |
| Transaction fees | 0 | 0 | (1 lump sum + 10 years × 12 months) × (CHF 9 + 2 + 0.85) = CHF 1’433.85 | CHF 200’000 × 0.5% = CHF 1000 | (CHF 200’000 + 10 years × 12 months × CHF 2’500) × 0.5% = CHF 2’500 |
| Reclaimed US WHT | CHF -5’922.88 | CHF -5’261.04 | 0 | 0 | 0 |
| Total | CHF 10’504.01 | CHF 11’516.72 | CHF 8’856.89 | CHF 6’261.04 | CHF 7’761.04 |
| Liquidation | 0 | 0 | CHF 9 + 2 + 0.85 = CHF 11.85 | (CHF 200’000 + 10 years × 12 months × CHF 2’500) × 0.5% = CHF 2’500 | (CHF 200’000 + 10 years × 12 months × CHF 2’500) × 0.5% = CHF 2’500 |
So the the difference between the best (neon savings plan) and the worst (finpension World) offer after 10 years is CHF 5’255.68, or about CHF 500 per year. Not that much of a difference, no?
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Thanks for sharing
Will look into details
But if 500 CHF per year is a lot or not depends on the person and their comfort level. I have heard some people might change banks because one is free and other charges 50 CHF per year.
So I guess it comes down to the benefits vs extra cost. And if those benefits matter to the person involved. For example if one already have world ETf at SQ, they might not see this as a benefit to move money. But if someone already has FP account and want to consolidate , then they might see this differently.
Thing is that you also pay 0.5% (+0.15%) when selling with neon.
This applies to FWRA as well by the way.
Shouldn’t that also be included in the calculation?
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You’re right. Although you could transfer the title to another broker (i.e. SQ) where selling it is much cheaper. I included it in the above table.
The calculation is not perfect anyway, as I assumed 0% performance over 10 years, which is highly unlikely.
Good shout!
Thank you @woody 
it is already possible to transfer securities out
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That is indeed what it boils down to. finpension offers:
- very easy to use interface to set up up to 10 different portfolios from a curated list of ETFs
- the ability to easily change asset allocations (“I’m going to add 10% REIT and reduce gold to 5%” etc.), this can be a blessing and a curse!
- free currency exchange
- cheaper access to private markets through insititutional-class funds
- restricted access (you can only deposit from/withdraw to an account in your name)
Is there something on that list worth 500.–? That is a personal decision, and there’s no right or wrong answer.
For me, the last point is quite important. To be honest, I’m starting to feel uneasy when thinking about having a portfolio of half a million CHF on neon. To be sold and transferred with a few taps, with the same app you do your daily banking with, on the device you carry around with you all the time?
When it comes to these things, sleeping well at night is an underrated criteria. I’m not sure I do with neon with the current security mechanisms in place.
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Hello, I’m interested in the new finpension service. Does anyone have a code to send me in MP?
I think the main worry you are pointing out is exactly the benefit people earlier in their investing journey actually prefer. In few taps, you are invested.
I understand the concern that banking and investing app is same for few other Swiss brokers (Neon, SQ) but I also think you can always choose not to have the app. For example I only use SQ on laptop. I don’t use Neon so I cannot say if it’s possible to be laptop only or not. Having said that, again, this can be seen as a benefit as well. The one stop shop.
It comes down to individual preferences as you say and what matters most. Kind of proves the point why so many rich people invest via UBS/ZKB etc irrespective of their fees. Because peace of mind matters.
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Aside from the aspect of registering securities in one’s own name and the banking license held by SQ, what is the benefit of buying ETFs like VWRL on SQ when Finpension’s offer, with its reduced fees, simplifies this?
Is there still a future for a buy-and-hold strategy on SQ given this type of offer?
For large portfolios, Swissquote with FWRA (or VEVE+VFEM) is still noticeably less expensive as both the custody and transaction fees will be more or less fixed up to 1 Mio. (at which point they’d be 0.035% p.a.).
As far as I can tell, the calculation above doesn’t account for the slightly higher Swiss taxes in the finpension solution due to being required to declare gross dividends to be eligible for the DA-1 tax credit. The DA-1 tax credit is still beneficial, of course, but might be closer to 0.1% p.a. than 0.15% p.a., depending on your marginal tax rate.
finpension invest is more convenient, of course, especially if your portfolio is more complex than just a single ETF. And Swissquote is relatively expensive for small portfolios. I think there is a market for both.
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When talking about UCITS investments at Swiss firms. SQ is just cheaper. That’s it.
Finpension is more expensive. If you already know what you want to buy and just stick with it, then you need a broker with no or low custody fees and management fees.
Finpension is offering a good service but would end up more expensive for DIY investor. Over the years all these costs add up. Don’t get me wrong, I really like FP and use them for pension accounts. It’s just that for now, there is not enough for me to switch.
In this forum there are many discussions about advantages of US ETFs, the only reason was cost advantage over UCITS ETFs. The cost was around 0.2-0.25 % annual impact on annual basis. So this means such a difference matters.
If yes, then the 0.39% fees at FP should also matter.
Some details below
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