Is IBRK really the best choice if you do not plan to stay long in Switzerland?

Investing / Others
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Hi, I’m making this post because all I read is related to the best choices for people living in Switzerland. And while this country is wonderful, some expats are here only short term.

That is probably my case, as I would be returning some time in the near uture to Spain. I was checking and considering different options and I’m not entirely sure IBKR is the best choice to dump a large sum and chill if we consider too the time past Switzerland.

I’ve been suggested to choose the optimal solution while in switzerland, sell and relocate assets when I know I’m moving out, sothat too is an option, albeit not as frictionless as doing it in one go.

I will use as reference this wonderfull post:

This is what I believe would happen if I lived in Switzerland, I’m considering here:

For Neon the FTSE All World Acc USD
For finpension the equity 100 plan

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In Switzerland

The VT does not have the WHT in origin (from share to fund) whereas the Swiss brokers do. I have read finpension is able to recover it, but in this analysis I have assumed it does not.
Neon has a 0% specials on the above fund, so it only has stamp duty as starting fee.

With that in mind and an estimated 7.5% for the underlying benchmark index, the VT is the best performing and it has a net 6.66%. Neon slightly overperforms the Irish version of the VT in IBRK, but the difference is 0.25% between them and VT.

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In Spain

Here the main difference is that Spain does not have taxes on dividens as long as the fund is acc. If it distributes you pay roughly 20% of them. Another difference is that you are no longer able to operate with VT. You can hold existing shares though.
You can’t either recover the WHT that the distributing funds such as VT take.

With all the above, a distributing fund performs much worse than an acc, even if the fund is as good as VT.

In this case and under the exact same conditions, VT manages a 6.86% net while Neon FTSE overperforms with a 7.15%

I have not taken into account any fees IBKR might have on buying or FX fees.

So, if you purely want to go or best performance, I guess the way to go would be:

  1. Buy VT while in Switzerland
  2. Sell all when moving abroad so as to net capital gains (in Spain those are taxed), and buy FTSE all world
  3. Send the ETF to Neon
  4. Hold the Neon ETF for 20 years

But the thing is, is it worth roughly a 0.2% performance over 2-4 years with IBKR all the hassle that you can save with just having the funds the same place you have your payslips?

Am I missing something here? I don’t think I have, but just in case.

EDIT: Ok so I spoke with Neon guys to clarify and it seems I mixed them with the finpension guys regarding whether I can keep my account after moving out of Switzerland. Neon has told me I can’t.
While I can just not tell them I left, if 50% of the post is regarding peace of mind as argument for not investing in IB when I’m still in Switzerland, the same goes for “alegally” keeping a Neon account.
This means when I move out I should either trust a spanish broker/bank, or find a UCITS accumulative version of the VT.

1 Like
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Interactive brokers is still the best. Use it while you are in CH.

When you return to spain: Sell your shares and transfer the cash to the new broker

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Don’t know about Spain, but sometimes foreign brokers are not advantageous, so that should also be part of the equation.

(Also is Neon happy with non residents?)

In general it’s probably best to revisit on a per country basis, around the time you move.

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I’m not super sure about the part regarding sending ETF to Neon. I know they have no issues with keeing the account if you are no longer in Switzerland. I don’t know specifically about the broker but my understanding, as they will not provide any tax service withthe assets but just custody them, is that it should not be a problem.

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FWIW:

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Yep, I wasn’t sure but I believe it wouldn’t be as simple. So this effectively eliminates the avoiding stamp duty part. It is easier to transfer cash and purchase.
My main point is though, I believe the mental toll it would take for me to deal with IBKR is not worth the 0.2% performance that I’m going to get.

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Depending on the amount you’re going to withdraw each transaction, a standard swiss Broker like Swissquote or a broker like Saxo might just do the trick. Because neon’s 0.5% selling fee is quite high, unless you plan to withdraw <2k every time.

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And what terrible “mental toll” is dealing with IBKR exactly?
Plus you can keep using it when you leave for Spain too, no asset movement/selling required.

4 Likes
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Dealing with (for me at least) large amounts on an unfamiliarized, not exactly user friendly platform.

As I stated above, VT in Spain is indeed a worse choice as it distributes dividends. At least, the difference between Neon FTSE fund and IBKR VT in Spain is larger in favor of Neon that it is for VT in Switzerland.

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This post is same as on Reddit

https://www.reddit.com/r/SwissPersonalFinance/comments/1grt355/comment/lx8xlni/?context=3

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I can explain because I felt the same strain and even posted here about it (first post on this forum). I went with a Swiss broker at first before consulting the forum (UBS) and then switched to another Swiss broker (PF) after consulting the forum, as they have substantially lower - not AUM based - custody fees. The transaction fees at PF hurt me, and even hinder me (is this good or bad?!) making transactions on the fly, or on a whim. 500CHF is not a life-changing or even significant amount, but it’s still not an amount I’d piss away that easily, and reshuffling my portfolio would cost me that, or more.

It’s mentally comforting to know I can literally walk down to a post office in my town and talk to a human - say because I screwed up my TFA or locked my account. Edit: That’s a human mistake which can happen, and I won’t relinquish the ability to do that, for almost any fee, and if someone calls me an idiot I’ll just call them a child who has much to learn about life :wink:

Also, given I’ve been building this portfolio with a bit of cash at a time, and get paid in a Swiss bank account anyway, I know it’d cause me a lot of mental grief and stress to transfer all my savings with a few clicks to somewhere on the net - even if I am already doing that. I’ve never transferred big amounts in my life and I don’t find it obviously simple, emotionally, to simply sell and transfer 100s of k or more to IBKR or anywhere else. It’s the familiarity that drives being with PF. Also if I want to sell I can do that and the money is instantly in the same bank account, no transfer needed, no questions asked.

Also, regardless of whether this applies or not, I feel some sense of emotional security taxwise because given I declare these accounts on my tax forms I tell myself “The Swiss tax authority knows about it for years already and can track how they’re going, so there won’t be any questions if I want to sell - the money is in a Swiss account already for years now”. I know this is bullshit, but to me it makes some sense.

I think once someone becomes a citizen they can maintain their Swiss account wherever they are (?), so that’s my plan anyway.

1 Like
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Sometimes I feel not using IBKR and VT is almost a sin in Swiss personal finance society

  • 3a accounts are mirrored to VT. Any product that doesn’t let you do that is not good
  • personal investment is simply VT at IBKR
  • IBKR + VT is a rule thou shouldn’t break or else

Who would have known that IBKR & US ETFs would have so many fans in Swiss society.

But I think this also puts an unnecessary pressure and confusion in minds of lot of people. Articles on poorSwiss rank brokerages with special focus on availability of US ETFs.

Such a hard stance often ignores that people have different reasons to invest and different level of comfort for different things.

Disclaimer -: I have committed the original sin myself. I am not 100% VT/ IBKR anymore :slight_smile:

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Yet you’ll find there are sooo many sinners here :wink: I think this community’s hardest stance is on insurance 3A, which is great to be as it’s about the worst mistake one can make. I know I did…

We’re all adults here, moreover many here are highly-educated, well-travelled, highly-paid, responsible, thinking adults. It’s natural that we make up our minds, opinions of the community will be evaluated for their merits - as there’s a ton of value here - but ultimately the decision is with the individual.

Don’t know if to thumb up this post, or clap it, so here’s both!

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Regarding your prior comment, the topic is roughly the same, as the author is also me. I don’t believe it is forbidden but as I don’t know if the readers are the same, it is likely I get perspectives in one place that Ido not get in the other.

I get the efficiency part and if you plan on staying in Switzerland it’s probably the simplest, most efficient investment, but I don’t think more than 50% of expats are planning on staying in Switzerland.

As Mirager beatifully explained here:

It is not so easy. The first time I tried to open an IB account it got rejected and closed. Istill don’t know why, probably some compliance document, but talking to actual people about it was a real pain in the ass.
Also, that I have to put my user id and my name every time I want to make a transfer is not ideal. Maybe there is another way or maybe that is normal for brokers, but I’m used to having my own IBAN which is uniquely mine and transfer there, without the need to supervise. For some is trivial, for others there is this added stress.
Once you start, everything is relative. Before you start is a wall that in Neon you simply don’t have. And that ease of mind is well worth a 0.2%

In any case, and I’ll probably edit the OP, Neon has just confirmed me that If I leave Switzerland I have to close my account. I guess the ones that told me I could keep my accounts were the finpension guys when I did my 3a and I was mixing them in my mind.

This kind of simplifies things as even though I could just not tell them I have left, if peace of mind regarding the custody of my ETFs is what I’m after I’m not sure this new Neon situation beats IB in the long run.
Which means I can still trust IB + VT while in “der Schweiz” and look for the acc UCITS version of it when I’m gone.

By the way, if you don’t mind me asking, what else besides IB + VT do you have?

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Spanish investors having accounts outside of Spain have multiple reportings (either to the tax authorities or the bank of Spain) to produce such as Modelo 117, ETE, D6, 720 + annual tax return.

There are fines and penalties for those who don’t comply.

To simplify my life, I would choose a broker being able to generate such documents for me (and make my life easier)

2 Likes
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I didn’t read the post in detail but I have the feeling that the title is a bit misleading.

With IBKR you cam purchase (mostly) whatever security you like, not only VT. You can go with accumulating ETFs. The cost is usually competitive.
You should be able to retain the account and the securities if you relocate.
Am I missing something?

2 Likes
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Following three are my go to WORLD ETFs now

  • VT
  • Amundi WEBG (trades in EUR or USD, TER 0.07%)
  • SPDR ACWI (trades in CHF, TER 0.12%)

I use third one when I use a Swiss broker to avoid currency conversion & reinvesting charges

1 Like
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I mean it is kind of difficult to answer you about doubts you may no longer have if you do read the post in detail.

I guess you could say it is a bit misleading because IBKR alone is not the issue, but the adviced combination on Mustachian Post of it with VT or VWCE. But event though the title does not detail it, it does so the actual post in which I show what I’m comparing and why.

My conclusion was that VT is not so competitive in Spain as other funds, and that VWCE, which would have been the recommended choice, is worse than FTSE All Caps purchased with Neon. With those findings, I was trying to debate whether it held merit investing here in Switzerland on VT and then sell and change or start from scratch with other providers.

But in truth my analysis was flawed because I remembered that Neon allowed me to keep my account living outside of Switzerland but I was wrong, they don’t. I can of course tell them nothing, people do so, but I really can’t argue against IBKR because their unfriendly user experience does not give me peace of mind and at the same time use neon knowing this.

So yeah, you can buy FWRA which is the same fund on IB, and it also beats VWCE. Or even go for other funds tracking the same index but with cheaper fees.

In fact, knowing what I now know about Neon, I will probably put some more effort into IB and do so.

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Why not use a more user friendly swiss broker?
I guess swissquote or any bank should be easier.

Then you have peace of mind.

And its good for the rest of us, because you will pay stamp duties. Thanks for your contribution :wink:

1 Like
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Well, I’ve taken the time to read the post in detail, but my doubts remain…

The post title mentions IBKR and staying in Switzerland for a short period, yet the content focuses on a very specific use case - optimizing the profitability of investing a lump sum in a world ETF before relocating to Spain shortly thereafter.

Beyond the issue with the thread title vs. contents, I also find certain figures in your table unclear, partly because the underlying calculations are not accessible.

For example:

  1. Why do the securities in columns 3 and 4 have different TERs when they refer to the same ETF (FWRA)? The TER should be 0.15% for both. My understanding is that the only difference between brokers should be the one-off fees (e.g., buy fees and stamp duty).
  2. Regarding Finpension Equity 100 (column 5), this is not a single fund but a combination of funds. Wouldn’t it make more sense to select the single fund most comparable to VT/FWRA to reduce recurring costs like TER and rebalancing fees? Even then, it’s unclear to me how Finpension (with a 0.39% annual fee) outperforms FWRA via IBKR (or Neon, if maintaining an account after relocation were feasible). The higher annual fee should outweigh any benefit from lower TER, leading to a lower Net Profit.

So, if my second point holds, the remaining practical options would be:

  1. Buy through IBKR and hold the investment as is, or
  2. Buy through Neon (if preferred for its user interface), sell before leaving Switzerland (to reset your cost basis), and open an account with a Spanish broker upon relocation

just my 2 cts