Interactive Brokers or another broker? [2023]

Investing / Brokers
62

Thanks, so the problem is the fees, and reclaiming 15% of 2% (dividend taxes).

I will stay where I am.

63

Thanks, I can’t recall for the S&P500 ETF, I certainly don’t convert CHF to USD whenever I am buying it. Edit: yes, checked now, it is on BX Swiss indeed, what does that mean?

Re: Swissquote, it’s a neobank, I don’t want that. I am happy to pay for the ability to physically walk in a bank and talk to a human.

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64

Was just added to STOXX Europe 600 Index.

Judging by the fact that you have started this thread, not really.

You can. In Gland and ZĂŒrich, if I am not mistaken.

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65

I’m sorry but I have to :laughing::

The future is now, old man
Dewey

For me it sounds like you already made up your mind and there’s nothing that could convince you to use IBKR or any other broker that people recommend here.

For me personally the fee advantages far outweigh the ability to “physically visit a bank” (why would I even need to do that? To get advise from them?..)

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66

That’s not the case, the reason is to understand if there’s something other than the fees (and use of US ETFs for US indices) that I am missing. Anywhere I look I see the same recommendations: IBKR, Revolute, Swissquote, I needed to see if I had understood the reason behind the recommendations or not, and seems I had.

Thread can close, cheers!

67

We all have our particularities, for me this is one of them. Investing is emotionally taxing for many people, including me. It was a big step to dump 70k saved over a few years in a day, took ages to do the research and convince myself completely that diversified, low-cost ETFs is a winning strategy. If I lose efficiency to gain comfort I am happy to.

And yeah, I was born old at heart :wink:

Edit: doesn’t mean I can’t change in the future. I am less than 6 months in this after 2-3 years of sitting and mulling it over, I just like simplicity, already have several apps and TFAs and passwords to keep track of (bank, car insurance, health insurance, IBKR, second pillar, third pillar
) it just gets to be a headache!

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68

I am thinking sometimes what would be my idea of a “supersafe stocks investment setup” from the “counterparty risk” point of view. I come to conclusions that would be Switzerland-domiciled funds with Switzerland-domiciled bank as a custodian. For example, Swisscanto funds in a custody account in a Swiss bank, not necessarily ZKB, could be Swissquote as well.

If you are buying US-domiciled ETFs, you can as well go with a US broker. Same level of systematic risk.

If you are buying IE ETFs, you can as well go for a European broker.

If you are buying European ETFs at IB, UK subsidiarity, you are dealing with a UK broker in some sense.

Furthermore, there are some options for “directly” holding securities, without an intermediate broker.

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69

They are not a neobank. They are also not brick and mortar bank, though.

Maybe that’s what you want?

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70

If this is a lot of money, I think the fees are even more important, as said in my example above, the custody fees will cost you half of that money im 10 years once you reach a million. And what do you get in return for that? Absolutely nothing, your securities are as safe in UBS as they are in Swissquote or IBKR, no matter if they have a physical bank, the securities are digital and not stored in a vault :slight_smile:

Very good!

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71

That’s a good consideration which I will take seriously. I am guessing transferring securities to Postfinance is no big deal?

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72

There are 3 reasons to use IBKR as a broker over a swiss bank:

  • fees (including for exchanging currencies).
  • stamp tax (swiss brokers levy it, foreign brokers don’t).
  • margin loans (IBKR has very favourable terms).

I’m using TradeDirect, which is a solution from the Banque Cantonale Vaudoise for much the same reasons as you do. They have lower fees than UBS. Their custody fees are 0.025% (min CHF 10+VAT per quarter, max CHF 25+VAT per quarter) and have flat fees for each trade. At most, for trading lots of CHF 750, that would be 1.19% per trade on SIX. For a slightly lower than CHF 2000 trade, that would be 1% on SIX, 1% on a european exchange or 1.20% on an american exchange. If you’re trying to calculate your potential future costs yourself, they have a hidden flat CHF 2.00 per transaction fee that should be accounted for.

73

Thanks, I’ll look at Postfinance from the new year after I’ve done taxes etc.

74
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75

Postfinance is using the platform of Swissquote.

76

To get advise from them?..)

Yes! So they can explain which new active funds are best ‘for you’ .

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77

Actually when I went to open my custody account they pushed fairly hard for active management. Their pitch was “While passive management has admittedly done pretty well the last few years, there is a lot of volatility and uncertainty coming up so we are confident in our experts hidden in bunkers under the Furka Pass, who will work day and night to make you money”. For 2.8% annual fees!

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78

You are good and do the right thing. Only advice - move to ZKB, or if you want Raiffeisen and ask UbS to transfer your fund. Take a „real“ Bank that is cheaper than UBS and doesnttake 0.35% p.a.

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79

ZKB takes 0.30% p.a. for securities in domestic custody and 0.40% p.a. for securities held in other countries. I.e., not significantly less expensive.

Raiffeisen is a bit better with 0.25% p.a. (+ an extra 0.1% p.a. for US securities) and a commission of 0.5% for trades at SIX (minimum of CHF 40 per trade).

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80

TL;DR: Fees matter a lot over the long term.

Advice:

  1. Switch to IBKR while your transfer costs are still low.

  2. At the very least, switch to Swissquote (or a similar lower cost Swiss broker) if you can’t shake off your sentiment that Swiss brokers are somehow “better/safer” than IBKR.

More detailed reasoning below if you are inclined.

Custody Fee

Your expected* portfolio value with your investment strategy at UBS vs IBKR and 70k invested today equally in the securities you mentioned:

| holding period | UBS       | IBKR    | Delta |
| 10 years       | 151k      | 156k    | 5k    |
| 20 years       | 335k      | 359k    | 24k   |
| 30 years       | 758k      | 842k    | 84k   |

Think of the custody fees not just in a linear, but in a compounding way: it’s not just substracting a seemingly modest 0.35%, it’s multiplying your assets with 0.9965 for each year you plan to hold at UBS instead of IBKR:

  • 10 years: UBS = 96.6% IBKR
  • 20 years: UBS = 93.2% IBKR
  • 30 years UBS = 90% (!) IBKR
  • 


Trading Fee

Similar arguments for the trading fees.

You are forgoing opportunity costs by sinking money into seemingly low transaction costs instead of investing it. I learnt this lesson the hard way:

I have spent about 20k at Swissquote for trades that would have cost me less than 500 bucks at IBKR 
 19.5k more spent at Swissquote (and probably even a bunch more at UBS)!
Money that not only I don’t have anymore but money that I otherwise would have invested with a return.
Significantly more money than 19.5k after 10, 20, 30 years 
 see above illustration for the compounding effect (I would expect 20k to turn into 50k over 30 years, YMMV).

General Remarks

  • Swiss Brokerage Fees are ourageous: As others have already stated, the fees for retail investors at “normal” Swiss brokers are just horrendous.
    A professional investor at any of the brokers in Switzerland pays in the order of a couple of bips (bip = 0.01%) for custody and in the same or lower order of magnitude for transactions - the broker mainly makes their profit with the spread in the issue/security (bid versus ask).
    A retail invester obliviously pays 10x in fees (or more) compared to the informed professional investor.

  • Swissquote is relatively cheaper (for CH), but still expensive: Personally, I even regret being with Swissquote instead of just IBKR and would have already switched to IBKR if I hadn’t negotiated with Swissquote a fixed custody fee instead of the portfolio size dependent fees they introduced earlier this year.
    I still grit my teeth when in comes to Swissquote transaction fees.

  • Comparing fees of your custodian versus your ETF: If you expect yourself to do no further trading at UBS (no further buying of the ETFs you mentioned, i.e. ISIN IE00B6R52259 and IE00B6R52259, i.e. all trading of the underlying issues happens all inside the thesauring investment vehicles), this trading fee argument would be less of an problem (but still worth asking yourself: why can your selected investment vehicle company - iShares - manage all their fees (including trading fees) at a total of 7 or 20 bips while UBS needs to add over 100 bips just for trading the iShare ETF?

  • Swissness, the label: You seem to assume that in case of the “worst case scenario” of a broker going belly up, you’re better off with a Swiss bank than with IBKR.
    I would challenge that: the Swiss government might want to “save the Swiss bank” going bankrupt for all those retail clients with checkings and savings accounts at the bank in order for the Swiss companies and businesses interacting with the bank to continue functioning without much disruption. I believe that is what happed with Credit Suisse having been swallowed by UBS with some discrete or not so discrete government guarantees in the background.
    The custodian part of the bank would however be treated like any other custodian bank: the securities the custodian holds for the security owners belong to the security owners, regardless of whether the custodian goes belly up.
    The securities will eventually be transferred to the owners, or rather, a new custodian that will hold those securities for the owners. There’s a process for this, and it will likely takes months or years depending on how that bankruptcy case will take, but the securities will end up with the rightful owner. Will the custodian being Swiss make things faster?
    Maybe. Maybe not.
    I would not bet on the broker/custodian being Swiss making things smoother/faster/better, but YMMV.

* Assumptions:

  • your chosen investments continue to return as they have in the past decade.
    I.e. “iShares MSCI ACWI” returns about 6-7% annually and “iShares Core S&P 500” (aka accumulating S&P 500) returns about 10% annually (maybe more)
  • tax considerations excluded
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81

Simply put: No, there isn’t, in my opinion. IBKR may cover more available exchanges/markets worldwide, but you obviously don‘t care about that, as you’re sticking to standard ETFs. I also wouldn’t get too hung up about one-time trading fees or stamp taxes, if you’re a buy-and-hold investor.

For you, the drawback basically just seems that UBS is more expensive in their recurring fees - and the taxation of that U.S. dividends in fully-replicating non-U.S. funds. :point_right: If you are OK with paying the premium, I‘d recommend you stay with UBS.