No that’s a different kind of “professional” qualification. One is whether it’s your primary job, the other whether you are qualified to make complex investment decisions (and whether you should be protected from potentially bad decisions).
2 Likes
Wow this blew up! I adjusted the title to avoid confusion. Let’s hope we can continue buying US domiciled stuff beyond 2020.
For me, I’ll go with the S&P 500 distributing fund as my primary investment basket. I’ve seen the Vanguard VOO
https://investor.vanguard.com/etf/profile/VOO being utilized a lot here, is it the go-to distributing ETF for the S&P 500?
I would personally advise against it. Why would you bet so hard on USA? Why not just buy the World? Then you would have Europe and Asia too. Historical data shows that US and exUS have had similar performance over the last 50 years. They have been changing leadership over this period, but the reign often lasted for a decade or more. You wouldn’t like to be on the losing side and wait for it to catch up, would you? That’s why if you buy the mix, you will get the middle result.
1 Like
You are completely leaving out one important detail, therefore much of this information is wrong. In Switzerland the law will be different than in the EU: If the service offered is Execution-Only, no KIID has to be provided which will be the case for most brokers. I have this in writing from the Staatssekretariat für internationale Finanzfragen SIF Please see here:
6 Likes
Actually, that detail is also included in my post in the last paragraph, but I didn’t use the same same terminology (execution-only), but described the reverse solicitation exemption (which is actually the wider exemption for foreign financial services providers). That exemption works very much the same way as the “execution only” provision that was mentionned by the representant from the State secretariat.
Furthermore, the e-mail you refer to also comes to the conclusion that despite this legal exemption (execution only / reverse solicitation model for foreign providers), it will depend largely on tbe financial services providers whether they will engage based on these request only type of deals (= "Wie aber die Praxis der einzelnen Finanzdienstleister aussehen wird, kann ich Ihnen leider auch nicht sagen.)
FYI, this is the answer I received from IB :
"Thank you for your inquiry.
At this time we can’t provide a definitive answer. I’ve consulted with my manager and most probably we will apply the same restrictions that were set forth with PRIIPs regarding investments in ETF, ETNs and Mutual funds for EEA (European Economic Area) based clients. That means that all clients will be regarded as Retail and won’t be able to make investments in US based ETFs, ETNs or Mutual funds that don’t provide the required documentation by the regulators. We will also offer the possibility to request to be reclassified as professional, most probably with the same requirements for PRIIPs.
The client would need to meet at least two out of the three criteria’s:
1 -I have: - carried out transactions, in significant size (i.e. value of trades totaling EUR200,000 or more) on the relevant market at an average frequency of 10 per quarter over the previous 4 quarters; and - at least EUR50,000 account equity at present.
2 - The size of the financial instrument portfolio in this account, defined as including cash deposits and financial instruments, exceeds EUR 500,000.
3 - I work or have worked in the financial sector for at least one year in a professional position, which requires knowledge of the transaction or services envisaged. "
8 Likes
1 -I have: - carried out transactions, in significant size on the relevant market at an average frequency of 10 per quarter over the previous 4 quarters.
40 Trades a year seems easy but the significant size of 200k is hard to accomplish. Nope.
2 - The size of the financial instrument portfolio in this account, defined as including cash deposits and financial instruments, exceeds EUR 500,000.
This seems easy doable for some who have already FIREd or almost there. For others it is a long way to go. Nope.
3 - I work or have worked in the financial sector for at least one year in a professional position, which requires knowledge of the transaction or services envisaged. "
What kind of proof might they want? Just fill out a survey? Then Yes.
Or must we be uploading some kind of “proof of work certificate”? Then Nope.
Ah damned. 
Guys, I’m wondering. Now it’s this, maybe we’ll find a workaround. Who knows what comes in 1-2 years. People who just decided to buy VWRL / Irish ETFs have a better peace of mind, I guess…
Then there is the issue of no online fraud protection at IB. Just imagine, if someone hacked into your account, he could easily bring the balance to zero, especially with a margin account. I guess I would feel safer with a broker that has my back on this. Of course, you can never be sure how would they handle your claim. How would you prove that it wasn’t you?
1 Like
Which company has your back on fraud? I thought only PF covers cyberattacks for 100000chf max.
We want you to have the highest level of confidence when you do business with Schwab. So we offer you this simple guarantee: Schwab will cover 100% of any losses in any of your Schwab accounts due to unauthorized activity.
https://international.schwab.com/public/international/nn/legal_compliance/security_guarantee.html
2 Likes
There are some insurances that covers that. allianz-global is one, but I am not sure if their maximum cover can be changed. A quick browse on their site shows a max amount of 20000chf.
Hello, I was very interested to read this thread. I am actually working as a banking lawyer in CH. It is true that Swiss law will change with LsFin and that going forward for retail clients, a short document (called a Feuille d’information de base (FIB) in FR), or a KIID (the equivalent in Europe) should BE MADE AVAILABLE to the client before execution of the trade. Vanguard US ETFs are unlikely to publish such document as such requirement does not exist (yet) in the USA and the EU/CH market is much smaller than the US/rest of the world market. I went to read the law, the ordinance and the rapport explicative and these are the solutions which I have found:
1st solution: For execution only transactions, according to page 23 of rapport, the FIB should only be made available if it exists already otherwise clients should be informed about the general risks of the financial instrument. I believe this point will be strongly argued by CH banks as a huge part of their business is to sell US products.
2nd solution: you may be able to ask your broker to categorise you as professional client. Under CH law, the criteria are actually less difficult to achieve than in the EU as if you have CHF500K and experience in financial services, you might be ok. the exact wording is:
(a) des connaissances nécessaires pour comprendre les risques des
placements du fait de:
a) sa formation personnelle et de son experience professionnelle
OU
b) d’une expérience comparable dans le secteur financier.
I would definitively argue the experience criteria if you have been dealing for a while.
3rd solution. this is a temporary solution but the implementation of the FIB is due in 01/01/21 at the earliest, for some products it might even be 01/01/2022.
I invest via IB in VT and I have not yet encountered any problem.
3 Likes
This response seems to contradict it. Maybe someone should urge them to contact the State Secretariat for International Finance of the Federal Department of Finance themselves to verify that they are still allowed to offer VT and other US based ETFs.
2 Likes
The two are the same thing - just traded at different stock exchanges.
I don’t think that’s of great relevance in the discussion and especially the funds mentioned here though.
VT is a US retail product.
I very much doubt Swiss banks have a huge business of selling US retail fund products to non-US retail clients. I’d doubt it for any European broker, really.
I think we should wait to have the final law.
IB seems quite responsive like the Secretary of State.
I’m sure a positive outcome will be found.
2 Likes
Do you have any update regarding the implementation of the law and potantial change done ?
On my understanding, the law will be enforced for january 2020. Is that correct ? https://www.efd.admin.ch/efd/en/home/dokumentation/nsb-news_list.msg-id-76957.html
I would assume that a broker like IB would be considered as execution-only.