Interactive Brokers (now renamed to Inert Brokers)
Joining the discussion here with the same pain as the initial post, but it seems there is no solution most here agrees, so heres my propoal - please roast it!
Today I have the „VT“-replica (total 85%) with VTI, VEA and VWO and 5% in ICOM, 5% in IDWP and 5% in X03H all at IBKR and I dont feel comfortable since its approx. 60% of my NW.
From what i learned here, we ca diversify on these buckets:
Asset class: I have 15% in other asset classes than shares → seems ok for me
Asset geography: I tried always to get a world portfolio picking these ETFs → seems ok to me
ETF Vendor: 85% is at Vanguard → not ok for me anymore
ETF domicile 85% is US → not ok for me anymore.
broker: only 1 → not ok for me anymore.
Therefore I openen an account at Cornertrader and plan to do 1 of these 2 options:
A:
Keep only the VT-replica on IBKR and move the rest to CT + adding a world portfolio with iShares (SWDA + EIMI) in order to balance both accounts 50:50 long term.
B:
Keep only VTI and VWO on IBKR (54% total), replace VEA with an developed world without US ETF from iShares (do they have a similar ETF than VEA?) on CT and move the rest to CT as well (46% total).
I like the idea of B since i wont have to build 2similar setups on both places and would still profit from the low tax advantages with US stocks…
What do you guys think? How did you solve this challenge? What am I missing?
So far: The non-US domiciled Ex-US ETF.
I haven’t searched for one myself - but from observation, most ETFs excluding one particular country are domiciled and marketed in that particular country (to provided international exposure for domestic investors). Relatively common exceptions are ex-Japan and ex-South Africa ETFs but not the U.S.
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Where are your 3a money? 3a invested in stock funds at finpension / VIAC gives you a diversification among brokers.
I was thinking about something similar to your plan B and decided to keep it as a plan B %)
For US stocks you need a US domiciled ETF, otherwise you get a tax disadvantage equivalent to an extra cost of 0.2 -0.3% per year. The rest of the world you can as well buy as Irish ETFs - TERs are somewhat higher, but no difference in withholding taxes. Ireland might even have tax agreements better than US with some countries.
Developed countries (MSCI) ex US are:
Japan
Europe
Pacific ex Japan (Australia, Singapore, Hong Kong, New Zealand)
Canada
Canada I decided to ignore, Pacific is small and can be also ignored until your portfolio is getting significant in size. I also ignore small caps, but the rule concerning the domicile is the same.
For an additional broker I went for flatex. It has 0 cost saving plans (executed 1st and 15th each month) on almost all European ETF and does not look as cheap as Degiro. But Degiro most probably will also work fine.
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…or - and you just gave me that idea - a tax-advantaged „pension fund“ fund - such as the ones available at VIAC or finpension.
I similarly bought (outside of pillar 3a) three „Quality“ ETFs for the US, Europa and Japan, while ignoring the few remaining developed markets.
Yes, I also realized it afterwards.
(See last paragraph).
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Thanks a lot for the reply
Its at VIAC and Finpension but only approx. 35% in proportion (inkl. 2nd pillar) to the account value of IBKR and the trend is negative + if something bad happends and I need access to cash, the 2nd pillar or 3a money are not easy and fast accessible, therefore I still would feel comfortable having 2 brokers. That said, I could mentally add the 3a + 2nd pillar to the diversified part here and keep VTI and VEA on IBKR, move the rest and replace VWO though EIMI on CT…
That would lead to a balance of 46:54 wich feels quite good at first sight…
Intersting. I’ve never heard of that (or I don’t remember it). Maybe you can post a short review in a separate thread?
edit: flatex and degiro are now the same company or they just joined.
I will do after the end of third quarter. Want to see how exactly I am going to be billed for custody fees (must be zero for ETFs, but I want to check myself before reporting anything) and negative interest rate.
They are, but they are operating separately. There are some movements though - degiro started to offer English in national sites (at least DE) and they offer now trading at Tradegate, although more expensive than their standard prices.
Be aware that if you hold a US domiciled ETF in a Swiss broker, it is important that your Swiss broker is a “qualified investor” (QI). Otherwise, you lose 15% of dividends. Most notably, PostFinance is not a QI!
A better alternative instead could be TradeDirect. They are a QI and they are backed by BVC cantonal bank, which has pretty good AA credit rating (be also aware that SwissQuote does not even have a credit rating!). Last time I checked TradeDirect (not sure if numbers are still valid), the maximum annual custody fee was 108CHF, the fee to move stocks in/out was 0/150CHF.
So, if you are looking for a very trustworthy Swiss broker at a reasonable cost, TradeDirect is a very interesting option, especially for high net worth. Make sure that you buy on IB and then transfer stocks to TradeDirect, in order to avoid TradeDirect transaction fees.
More details: W-8BEN on your own & 30% withhold - #18 by Frank
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According to wikipedia, also BCBE and BCGE. Anyway if the biggest cantonal banks fail, not sure how the canton will help (Zurich canton annual budget is one order of magnitude less than ZKB’s assets).
So the canton would likely need help from the BNS as lender of last resort if it comes down to it.
(that said, because of that guarantee ZKB is still one of the only 7 commercial bank that’s AAA rated)
Do you know what the cost of a USD wire is? For me dealing with the USD dividends to send it back to IB would be the annoying thing. (I assume their FX rates are very bad like all swiss brokers)
You mean Qualified Intermediary, but anyway, my experience is Postfinance is exactly same with US stocks as UBS, CS, etc, i.e. don’t lose the dividends, but get them back via DA-1 (15%) and get them credited to you (other 15%).
Here’s a Postfinance document, if not a QI, 15% US Quellensteuer would not be listed as shown.
My conclusion → Postfinance = QI
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They also seem to ask for W8-BEN.
My understanding as well (at least you’re benefitting from QI status).
- Keep in mind that Switzerland has had trouble with the US (and, to a lesser degree) the EU rather recently, regarding their banking secrecy - with hardly any collateral damage in the form of account freezes to Swiss account holders.
- The UK isn‘t part of the European Union.
- Once WW3 breaks out, your investments may be effed anyway.
- Both the US and UK will likely have other dispute resolution venues in place, and they do have supervisory authorities. Also, you’re unlikely to need to travel there in order to take legal action. People do take legal action through agents representing them (solicitors) all the time. That said, UK and US law may not be one you’re familiar or comfortable with, even when or after being professionally advised.
- Is it as secure? It‘s a question that can hardly be answered with a yes or no. Even if you solely focus on the deposit guarantee schemes (or similar for investment account holders), one may want to look beyond the coverage amounts only and research about their terms and conditions. What is a high coverage amount worth, if you can‘t or don‘t easily receive it?
Personally, I wouldn’t recommend making this trade-off in the name of simplicity. One institution can always go belly up, freeze your accounts or cards due to circumstances outside of your control (could be an honest error or misunderstanding), etc.
I feel safer and would recommend having at least one alternative payment account and card as a backup.
I agree that this is not a sensible decision.
It’s not only that something can go wrong with the institution that goes beyond your control. But also, that you can’t foresee (and plan for) all the ways in which something can go wrong (the “unknown unknowns”). Some examples: account getting hacked, getting scammed, getting extorted.
Another thing is that I personally don’t feel comfortable being dependent on 1 single institution. The same way a company doesn’t want to be dependent on a single supplier, it’s not a good position to be in.
“Diversification” and redundancy here is a very simple and cheap protection against these problems.
I have this exact setup, but with another provider for cash in the named of Neon. However, I use Neon as a credit card for foreign purchased (holiday, foreign e-commerce). And I feel really confortable with this setup.
Also, my girlfriend and I are sharing a joint account and both of our checking and savings accounts are in this institution. I preferred simplicity over optimisation or the risk that can occur.
For IB or SQ. I test both of them, and at the end, it won’t really change anything in case of trouble, you will in need of a lawyer or expert to help you to defend your interest. American and Swiss legislation are way to much complicated to be dealed alone without an expert (and it’s a lawyer who’s spoken).
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Personally I consolidated all my brokerages to IBKR to enable more efficient cash management and to take advantage of their low loan rates. Whether that is important depends on your personal situation. For me it has a significant benefit
I hold shares and funds which are in my name and so are ringfenced from a bankruptcy of IBKR (different situation vs. cash, though I believe some guarantees apply to cash too)
My main concern is what happens if there is a global hack on IBKR impacting me and I have to deal with an operator in a call centre. For this reason I envisage I may move to a Swiss bank if I am “rich” in the future but currently the cost of such insurance is too high. It is a trade off
I am less concerned about the political risks. If sanctions and trade barriers are going to be applied I figure it would be to other countries before EU-US-UK- CH ties are cut. So we would see it coming and have time to adjust
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I wanted to use it too but from my understanding you have to reauthenticate daily, so I didn’t pursue it further to automate my trades. Just as a fyi.
If the balance of the account would cross what I’d consider a “serious amount”, then I’d split it, into multiple accounts.