Because I wouldn’t feel comfortable with it. I want to have the ability to walk into a building and talk to a human if I have any sort of problem.
Few months ago my card stopped working, totally all of a sudden, and I was parked in a garage which didn’t have twint, and didn’t carry cash with me, and was about 30km from home. Thankfully a UBS branch was nearby so I could go and get some cash at the cashier to get my car out and get home (as well as order a new card). This was literally the first time a bank card stopped working on me in almost 30 years of having one. That was stressful for me, can’t fathom how stressful it would be to lose access to years of savings and having to hang by my email or customer support. Now I got 2 bank accounts and always carry cash again. I know I am a relic, an anachronism, but it’s fine, my sleep is worth more than a few franks per year in fees, and my investing is very vanilla anyway so PF covers me completely.
Edit: to add one more point, I am borderline disgusted with people earning 150-200k/year or more yet won’t STFU about how Revolut is “fair” and “boomer banks are robbing us”. I described the above to a friend who, of course, only uses neobanks etc and he said “if my card stops working I’ll have one in my mailbox tomorrow”. I said it would suck to be in a situation of losing hours of my day going back and forth trying to rescue my hostage car because I am cheap. “Pay peanuts, get monkeys” is something my PhD supervisor used to say, “not rich enough to buy cheap things” is something my dad always said. I just don’t want to find myself in a situation where being cheap bites me in the ass HARD.
This quote. This is why I decided yesterday ultimately to continue with ZKB, where I will keep my “hold” portfolio.
Saxo: their offering is nice, but they give me too much Degiro vibes, in the end. Moreover, it is a Swiss entity; the holding can switch the strategy anytime (I doubt, but it is theoretically possible). I really like the feature, that you can only transfer assets to an account in your name only.
Swissquote: one may not forget the hack attack in 2018.
Any other online broker: they are also fine, but do not fulfill my need.
When asking myself, if I can keep a higher number (>1m in wealth) at any of these online brokers, I have to deny it. I will therefore continue to use IBRK, but I will keep the numbers low and will transfer all 200k or so to ZKB.
I put 1k play money on IBKR, but haven’t played with it because it turns out I’m not a playa it’s just sitting in VTI and done well like everything else, will probably get it out at the end of the year.
In the end everyone has their own opinion on security. Security can mean different things for everyone
Account security -: availability of 2FA etc
Investor security -: (in case of brokerage bankruptcy)
Psychological security-: Brick and mortar / personal vs. Online only
Geopolitical security -: Swiss broker vs International
If you can rank IB, SQ, Swiss banks, Swiss Fintech, Saxo and Cornertrader on all of the above , everyone will come to different conclusion. Only a real finance + cybersecurity professional might be able to an objective comparison
What I have realized over the years is that it’s very easy to go down the rabbit hole and find issues with everything. What normally helps is data to differentiate between Anecdotes and larger picture.
Bottom line is following
Swiss banks (UBS, ZKB, etc) have very high AUM , so if you are with them, you are going to be fine
IB is one of the largest brokers , you will also be fine
SQ is one of the best Swiss brokers , I don’t think you will have problems
Saxo is one of the top European brokers with Swiss license , it is also going to work out fine
same might be true for others too
There is always a cost to get added level of „security „ and comfort level changes with growth in wealth. When someone is new, 200 CHF per year custody looks ridiculous, but when someone has 5 million, maybe they will also be fine with 0.3% custody fees.
I just think we should always be objective in our information sharing because it can put someone else down the rabbit hole of over analyis. I also think I need to be careful myself.
What might help is diversification of brokerages and banks. In the end it’s all about money. So if someone has spread their money across 4-5 companies (including brokerage + banks+ deposits) , it is more than enough.
Part of my switching from UBS to PF was exactly to go from %-based fees, as they will always go up, to flat fees. Then again I don’t have 5mn, or 1mn, or close to that, I bet it changes one’s perspective.
The rest is getting into diminishing returns territory for me, but totally understand people who want to optimise to the nth degree when the tools are easily accessible.
Replying to myself. I see on the DA-1 That the column for US is empty on my IBKR Tax declaration.
If I had them at SQ/PF I’d have to find out how to fill it.
My comment is going to be theoretical because so far i have not claimed that kind of credit. I mean i dont have US ETFs in SQ yet.
Lets say you hold ETF worth 25000 USD and dividend income is 500 USD
How it works is following
You will fill a W8BEN form at SQ and this means your US ETFs will have 15% WHT (=75 USD). Important point is that not all swiss brokers can do this step as they need to be Qualified intermediary.I do not know who else can but it’s always good to check first. Thus it is critical that you only hold US ETFs at Swiss brokers if they have Qualified intermediary status. Or else there will be problem in recovering money
On top, SQ will deduct additional 15% (=75 USD)
When you file your tax return, you will use the DA-1 form and claim back both. You need to check the box as shown below which will automatically capture 75 + 75 = 150 USD.
Of course you need to show proof that SQ actually did deduct these taxes
By the way, the latest broker that almost went belly-up was a Swiss bank called Credit Suisse (anyone remember?). It paid Swiss salaries and it was regulated by … FINMA.
Decided to read up on the previous replies in this topic after dropping my Credit Suisse turd above … now I have a few more comments:
TL;DR: pick a pure, global broker instead of a bank/broker, Swiss or not does not matter at all.
In more detail:
Myth: “you’re fine with Swiss banks with large AUM”*
Well, you see, I already mentioned the Credit Suisse near-miss catastrophic accident - I get it, it’s already over a year ago when this cluster- … ahem, little pile-up was elegantly averted, thanks to a couple of governments chiming in - but for those of us stubborn enough willing to look back even further than 13 months: going back in time the previouslast time a Swiss broker almost went belly up was in 2008, when the other large Swiss bank, UBS, needed a bail-out from the Swiss government.
Both banks are/were Swiss, both have/had gigantic amounts of AUM.
Did I already mention that both are/were FINMA regulated?
In my book, this puts to bed the idea all three triplets at the same time:
Swissness
large AUM
FINMA
Sleep well and tight, little triplets! Let me tuck you in.
If you still think the Swiss finishing touch guarantees a better outcome, I commend you to it and I wish you good luck!
Myth: “Cyber security is better at (Swiss) bank X versus (international) bank Y”.
Maybe. Maybe not.
I can’t really speak in much detail here, but when I last worked at one of those two major global Swiss banks (one remains), actual cyber security measures depended on the knowledge of the team or department head (read: a person so far removed from technical judgement that they would only be reminded of their lack of knowledge in the case of an actual breach).
Maybe it’s better now? The sheer size of the remaining organization make me doubt it.
Myth: “Brokerages go belly-up all the time, hence I need to distribute my eggs amongst many (brokerage) baskets”
This one intuitavely resonates most with me. I don’t want to lose or at best be stuck with my assets for extended periods of time when my favorite broker goes out of business.
However, let’s look at the brokerages that actually went belly-up in recent times.
Lehman Brothers in 2008.
MF Global in 2011.
Peregrine Financial Group in 2012.
Were these scary moments in time? No doubt.
Was retail investors’ money lost in any of these? I don’t know. I doubt that investments in custody accounts went missing.
Does picking your particular slice of brokerage providers protect you from these events? Hopefully.
Good luck.
If indeed I would join some of the permabears and doom-mongers - none are on this forum, of course, just mentioning for completeness that there are people with such a mindset on the Interwebs - then my recommendation as a retail client would be as follows:
Pick a (mostly) pure broker instead of a bank!
Avoid brokers which are just part of a bank (or any other financial business like payment service providers - hi, Postfinance!) instead of just using a pure broker (like IBKR).
Let me explain.
Essentially, a bank’s entire business is to take risk to make profit.
Let me repeat: “a bank’s business model is to take risk in order to take profits”. Insert Charlie Munger’s quote of “show me incentives, I’ll show you outcome”, and you’ll inevitabily see people taking too much risk for seemingly outsized profits. It’s just human behaviour.
Most banks do this prudentially, some not (see above, and below).
When a brokerage is tied to a bank, and the bank takes a hit because it took too much risk, well, guess what, the bank goes down and it takes the brokerage along with it. You’ll get whole, as a participant of their brokerage, eventually, but it might take some time.
Conclusion: pick a broker! Or a bank with its main business being a brokerage.
* Paraphrasing some of the suggestions above.
** Including the Swiss banks mentions before - UBS and CS - , but feel free to throw in Julius Baer as the third largest Swiss bank)
Even in a bankruptcy instead of a bailout, people wouldn’t have lost their assets held in brokerage accounts, nobody else could have laid a claim on those.
(I even think that all the depositors would have been made whole as well, tho there could have been some period of account freeze above 100k while they reshuffle things)
edit: I see you touch that point below, for me it just doesn’t matter, I don’t really worry about assets disappearing on any reputable broker/bank.
Banks. I fully agree that banks are inherently risky. But the history shows, that large, systematically important banks are rescued in case of trouble. In 2008 Abn Amro was nationalized, ING was helped, Swiss banks (though i am not much informed about Switzerland) were also helped. Lesson: some large banks are too important to let bankrupt.
Brokers. They also rake risks. The risks are different, but any business may go belly up. Fintech brokers like DeGiro constantly search for the boundaries. Specifically DeGiro had a serious issue with separation of own and client assets. It is not widely known beyond the Netherlands, but there was a mingling of customer assets and DeGiro’s.
IBKR. Looks very good, I am with them. But IBIE has two serious drawbacks. They explicitly refuse in their ToR to compensate if you are hacked. You must rely on thei system, while they give you no guarantees. Second, it is a sprawling broker, spanning lots of jurisdictions. It may be very difficult to prove your point in case of trouble.
Lokal banks have an advantage. You can raise a scandal in local press, if they screw you up, for instance. With IBKR it might be much more difficlut.
Anyway, if a bank/broker goes bankrupt, your assets should be nominally safe, except for fraud. The biggest remaining risk is cyber security and functionning of their systems.
What if they were wrongly spirited out of the brokerage accounts before the collapse, then you’d still be holding losses. In bankruptcy and collapse a lot of things that can happen that are not ‘by the book’.
If you have a large-ish 7 figure account at a Swiss Private bank, if your MFA is compromised even if due to your own carelessness I think it is reasonable to assume your client advisor would contact you if strange transactions start happening.
At the very least, you would be able to talk to your client advisor in advance and say that you would like this to happen
Let’s hope that the attacker who tricked you into giving them access to your account didn’t change your contact details on the ebanking site.
Client Advisor: “Hello, Mr. Barto …?”
Attacker: “Yes …?”
Client Advisor: “I wanted to call you about a transaction that was initiated on our ebanking system.”
Attacker: “Yes?”
Client Advisor: “It’s about that international bank transfer of x’xxx’xxx CHF to Sberbank Switzerland AG.”
Attacker: “Ah, yes, I indeed want to make this transfer. But thank you for checking in with me first - really appreciate it!”
Client Advisor: “No worries! Your transfer is now approved and should go through later today. Is there anything else I can help you with today?”
Attacker: “Not at this time, thank you. Have a nice day!”
I know all of us trying to be rational and logical. But I think we should not trivialise the concerns people have or the comfort they have with certain type of establishments versus others.
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it’s just sitting in VTI and done well like everything else, will probably get it out at the end of the year.
