Interactive Brokers - all eggs in one basket?


#14

Sorry I am late on this thread and the discussion has moved on, but

For which scenarios you need another broker than IB? I mean, what do you imagine could happen to my securities at IB?


#15

Well, as I’ve been reading all over to choose ETFs instead of single stocks so to fragment your risks, same should be for the broker you choose. If there wouldn’t be risks, why would they give IB a rating? (If not you could follow Buffett: “Keep all your eggs in one basket, but watch that basket closely.”)

For example as a total ignorant I was wandering about the effects of Brexit on the IB London account.

Also I’ve read in this forum that is the broker who owns the securities:

Or about what could happen to your cash:


#16

@hedgehog , I transferred those shares to Pf 4-5 years ago, long before I had even heard about IB. Yes, I will pay about CHF 100 fees to sell in about 20 years. I can live with that.
Swiss Stamp Duty (I translated it from Stempelsteuer or Transaktionssteuer) is charged equally when buying and selling shares in Switzerland (0.1 for CH shares, 0.15% for foreign shares). That’s why I wud imagine it a loophole to transfer shares from IB to Postfinance and thereby avoid the Swiss Stamp Duty (which is a relic from the First World War btw) and the tax man don’t like loopholes (nor people using them).


The Pillar 3a Tutorial
#17

What if they’d suddenly decide to jerk you around for some compliance nonsense? Happens at banks sometimes, can take months, even years to resolve during which time your money is locked down, and you’d have to find some other means to survive


#18

Hi, I found this site useful for comparing online brokers, in particular the section about ‘INVESTOR PROTECTION’.
https://brokerchooser.com/blog/best-trading-platform-for-europeans


#20

Another informative reading about risks with online brokers (i found it while browsing about IB “street name”) How safe are stock broker nominee accounts?


#21

All brokers keep your securities “in the street name” at least in the US, that’s how modern electronic finance works

Unless you got a few B’s to join an elite club like this and deal with a central securities depository directly


#22

So if IB defrauded you, you would only get back 50`000 pounds for sure?
(https://the-international-investor.com/investment-faq/international-investor-protection-rules-compensation-scheme-limits)

If that were so, would the risk of somehow losing the rest (even if the chance is very small) have to be taken into account?
E.g. if you pay slightly more with CT over IB, it might still be wise to go with CT because switzerland compensates up to 100´000CHF.


#23

It makes sense to have several brokers as long as it doesn’t increase your costs (that means no custody or inactivity fees).


#24

Complicated legal topic, maybe 500k of SIPC would also apply in addition to FSCS, but maybe not

They don’t - that 100k coverage is for cash balance only. Bank/broker goes bust, sure, esisuise will cover the small cash leftovers you had on your account, securities go missing - no, that’d be fraud/criminal case and you’re at the mercy of the justice system as to whether something and how much of it would be recovered.


#25

Reading all your very useful commentaries I reached important (for me) insights.

In finance (and everywhere) emotions are very dangerous if ignored/unconscious.
Every time I imagine to send all my financial possessions to IB, so far away (England) and in a virtual space (do they have a physical office?) I get very anxious.

Till now all my money/securities were in banks which I could visit (and did), I knew the front men, contacted them regularly. All this felt so reassuring.

Few nights ago, some thoughts that were floating around for a long time condensed as follows.

All their nice offices, all their reassuring employees have to be payed. The number of relatively reliable banks from which to choose are so many (for me at least: I have some possessions in Italy too). So for banks: high expenses and a lot of competitors with whom to share the pie.
Also, I believe more and more people are switching to online brokers.
Swiss banks: I heard at the radio some days ago that the banks firmly declaring that they are never going to ask their smallest customers to pay negative interests are now only 35 (they were much more sometime ago). What is going to happen when they will?
Conclusion: very difficult times are awaiting banks institutions (or more dramatically: has the time of their sunset arrived?)

Online brokers and specifically IB. Obviously less expenses. Much less competition: as I wrote introducing the topic, when you search for opinions about the best online brokers (both for European and american investors) the names that pop out are always the same and IB at the top most of the time (for reliability and prices, which I think are the two most important criteria to be taken into account).

So, going back to emotions: mine tell me to stick with my banks but in reality, which is more at stake? IB or them?

(Funny story: last year I did an experiment: bought via dollar-cost averaging the same amount of ETFs in a Swiss bank and an Italian one to really find out the expenses differences - fees, taxes. Results: both cheated adding expenses not included in the initial agreement - which after long negotiations I got to be the same for both of them. I got my money back but lost my already poor remaining trust. Now I think with IB this would never happen because fees are automatically charged and they would never risk their reputation in such a stupid way. But why banks do (and they all do)? Maybe because they already navigate in murky waters?)

Finally. If you believe there is a ranking in financial institutions where you could put your possessions as regards safety, and you also believe that the first one is way better than the rest, where is the logic in putting your money also in the less safe ones just for the sake of differentiation? Wouldn’t this choice in fact be more risky? Isn’t this again an example of emotions guiding us towards bad decisions?
That was the main question that prompted me to start this topic.

Because of my above mentioned reasons now I think the opposite: that banks are less safe than online brokers and more so in the future.

Please show me if/where my arguments do not hold water.


#26

I did some analysis on this topic some time ago. A good option would be Schwab through their UK branch: https://www.schwab.co.uk/. The minimum required to open an account is 25K
They offer multiple free comission ETF: https://www.schwab.com/public/schwab/investing/investment_help/investment_research/etf_research/etfs.html?&path=/Prospect/Research/etfs/overview/oneSourceETFs.asp (I’m not sure if this apply also for UK customer).
I also not sure concerning the currency fees.


#27

Other useful links for me:

Is your money safe from hackers at Interactive Brokers and Robinhood?

Reading this caused me a terrible headache: Hackers Are Hijacking Phone Numbers And Breaking Into Email, Bank Accounts: How To Protect Yourself

Whereas this upped my mood:


(In particular I was thinking myself about dedicating a small computer just to my accounts, and here I got confirmation that it could be a good idea)


#28

My plan is building a Swiss Permanent Portfolio so mainly CH ETFs. With Schwab UK is only possible to hold US products? Seems odd but since I read:

35


#29

Why a small computer when you can install linux on a usb stick and use it instead? Bonus point if you use a Readonly device :slight_smile:


#30

Compromised hardware, physical keyloggers, somebody finally cracked the ME, stuff like that.

Though it is not likely such attacks will be used against you it is still a risk and if you want to go paranoid, why not go full paranoid.


#31

yeah…

:slight_smile:


#32

Again about Brexit and Interactive Brokers I found this: Interactive Brokers: Das passiert mit EU-Kunden bei einem Brexit. Specifically:

Update 14.01.2019:

Interactive Brokers reagiert mit einem Brief an seine Advisor Kunden

Interactive Brokers verfolgt die Entwicklungen im Hinblick auf den Brexit seit vielen Monaten und plant verschiedene Eventualitäten.

Ungeachtet des Ergebnisses der bevorstehenden Abstimmung im Vereinigten Königreich am 15. Januar 2019 bezüglich des vorgeschlagenen Brexit-Deals und unabhängig davon, ob es einen “hard” oder “soft” Brexit geben wird, eine Verlängerung des Brexit-Zeitplans oder eine neue Brexit-Abstimmung, Interactive Brokers erwartet keine Beeinträchtigung , unsere Kunden in der EU oder in Großbritannien zu bedienen.

Interactive Brokers hat mehrere Tochtergesellschaften in der Europäischen Union und wir sind gut vorbereitet, um rechtzeitig weitere Registrierungen in der EU zu erhalten, um den EU-Kunden auch im Falle eines No-Deal-Brexit den vollen Umfang unserer Brokerage-Dienstleistungen anbieten zu können.

IBKR sendet derzeit keine Brexit-bezogenen Mitteilungen direkt an Ihre Kunden / Kundenkonten. Wir empfehlen Ihnen mit Ihren Kunden in Kontakt zu treten, um ein Einführungsgespräch zum Brexit zu ersuchen. Ein wichtiger Punkt ist, dass sich die Konten auf eine juristische Person beziehen: Diese Konten müssen über einen LEI (Legal Entity Identifier) ​​verfügen, dieser bei verschiedenen Anbietern, sowie über IBKR erhältlich ist. Der Erwerb eines LEI kann je nach Diensteanbieter 5-10 Arbeitstage dauern. Wir empfehlen Ihnen daher dringend, Ihre Kundenkonten zu prüfen und bei Bedarf mitzuteilen.

Wir werden Sie in den nächsten Wochen und Monaten über die nächsten Schritte bezüglich der weiteren Entwicklungen des Brexit auf dem Laufenden halten. Unabhängig von den Ergebnissen hat Interactive Brokers alle Schritte unternommen, um ununterbrochen alle Kontentypen, Handelsdienstleistungen und Anlageprodukte für unsere EU-Kunden anbieten zu können.

Vielen Dank, dass Sie Interactive Brokers verwenden.
Interactive Brokers Client Services

(Der Text wurde auf Deutsch übersetzt)

Ok we are not EU but still…What about Swiss kunden? If IB takes the trouble to write about it, it means that some problems are going to rise, aren’t they? (By the way, the meaning of the letter, quite foggy to me.)


IB and Brexit =?
#33

Just as a feedback to my post in Oct 18: Buying shares on IB, transferring it to Postfinance works as expected. Transfer takes about 4 - 5 business days. No charge or fee on any end. I do this to not have all my wealth at IB (all eggs in one basket).
Still I can benefit from the lower transaction fees and lower spreads at IB and no Swiss stamp tax.


#34

Neat idea. Will do the same.