Interactive Brokers - all eggs in one basket?

[San_Francisco]

@Dr.PI

For US stocks you need a US domiciled ETF

…or - and you just gave me that idea - a tax-advantaged „pension fund“ fund - such as the ones available at VIAC or finpension.

@Dr.PI

Canada I decided to ignore, Pacific is small and can be also ignored until your portfolio is getting significant in size

I similarly bought (outside of pillar 3a) three „Quality“ ETFs for the US, Europa and Japan, while ignoring the few remaining developed markets.

[Dr.PI]

@San_Francisco

and you just gave me that idea - a tax-advantaged „pension fund“ fund - such as the ones available at VIAC or finpension.

Yes, I also realized it afterwards.

3a solution from Finpension

The main advantage of tax-sheltered investment accounts (in Switzerland - 3a) is the tax advantage. It means that not only you are not paying income and wealth taxes on investment held in 3a account, but also that you are allowed to invest in funds which do not pay withholding taxes on dividends, because they are dedicated for pension funds. Now enter “CSIF (CH) III Equity World ex CH Blue - Pension Fund Plus ZB” (CH0429081620) available to individual investors via a finpension account. Accord…

(See last paragraph).

[Balaclava]

Thanks a lot for the reply

@Dr.PI

Where are your 3a money? 3a invested in stock funds at finpension / VIAC gives you a diversification among brokers.

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…

[ma0]

@Dr.PI

For an additional broker I went for flatex.

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.

[Dr.PI]

@ma0

Maybe you can post a short review in a separate thread?

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.

@ma0

flatex and degiro are now the same company or they just joined.

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.

[FrankRed]

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

[nabalzbhf]

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)

[nabalzbhf]

@FrankRed

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.

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)

[rolandinho]

@FrankRed

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!

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

[San_Francisco]

They also seem to ask for W8-BEN.

@rolandinho

My conclusion → Postfinance = QI

My understanding as well (at least you’re benefitting from QI status).

[San_Francisco]

• 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?

@Patron

I recently just closed everything except for my bank & savings accounts at 1 institution where all my cash will be

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.

[the_p]

@Patron

so I recently just closed everything except for my bank & savings accounts at 1 institution where all my cash will be

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.

[Yanikuza]

@Patron

I mean it would not all be with only 1 institution it would be like:

• 1 institution for all cash / daily business and savings
• 1 institution for all 3a funds
• 1 institution for all investments

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).

[Barto]

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

[anonym]

@Patron

and also that they offer an API etc.

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.

[the_p]

@Patron

Hm, so in the end you would not only have multiple brokers but also multiple bank accounts?

If the balance of the account would cross what I’d consider a “serious amount”, then I’d split it, into multiple accounts.

[San_Francisco]

@Patron

so in the end you would not only have multiple brokers but also multiple bank accounts?

At least (and here we‘re getting a bit off-topic) for day-to-day transactions, yes.

It could be a Yuh account in which I‘m holding a hundred shares of VT. And a couple hundreds of cash, to tide me over for a month or so. Also provides me a means of receiving salary, making payments, withdrawing cash, etc.

I‘ve been (got) locked out of accounts before - though not really due to faults of mine, and yeah, that doesn’t feel good. Unless you have a backup plan.

[Cortana]

I use:

Swiss bank for cash / salary / payments.
Revolut for non-CHF/abroad transactions.
Coinbase Pro for my crypto.
IBKR for my ETFs.
Viac for my 3rd pillar.
ValuePension for my 2nd pillar.

I see no point in splitting my ETFs further up.

[Balaclava]

@Patron

As soon as the time comes when my IBKR portfolio has grown to a size where I start feeling uncomfortable, I could open a secondary portfolio

I was exactly at that point some months ago, having almost 80% of my “liquid” NW at IBKR. After reading this thread and other research this is how I solved it:

I realised that there are several possible points of failures for a portfolio and you can/should diversify on:

1. The broker
   → Opened an account at Cornertrader (CT) and moved all my positions beside VTI and VEA to CT.

2. The location / country & underlying currency
   → I have a world portfolio

3. The ETF issuer
   → I kept VTI and VEA and replaced VWO with EIMI (from Vanguard to iShares) + I use the 3a (VIAC and Finpension) to buy stocks and went as well for non-vanguard ETFs for the other asset classes

4. The Asset class → I have 80% Stocks (VTI, VEA, EIMI, VIAC + Finpension) / 5% Bonds (Pension fund) / 5% in real estate (IWDP) / 5% in commodities (ICOM) and 5% in cash (Swiss bank)

5. Laws under which your investments are treated → I keep VTI and VEA as US funds for the lower dividend taxes and use irish funds for the rest. i paid attention to have that for the broker (uk & swiss) as well.

Doing all of that (and a bit of rebalancing), my exposure to IBKR and Vanguard is at approximately 50%, everything else is at CT, VIAC/Finpension or in my pension fund which lets me sleep better.

CT is by far not on the level of IBKR but works fine for me if you:

0. Move your existing positions from IBKR to CT (for free if the position is bigger than 30k)
1. Have more than 70k there, cheaper fees are applied
2. You open a USD Account there (will get you an IBAN for direct USD transfer)
3. You change the CHF → USD currency at IBKR and send it for free to CT
4. Do 4 trades a year (if you do so, no inactivity fee is charged (35.- per quarter).

Does it makes sense to you? Happy to read your thoughts!

[Yanikuza]

@Patron

As soon as the time comes when my IBKR portfolio has grown to a size where I start feeling uncomfortable, I could open a secondary portfolio at something like FlowBank.

FlowBank are more and more interesting indeed. They improve a lot their fees, but I will give them 2-3 years to prove that they can be better or as competitive as Swissquote. At least, they are better regarding fees.