Now I’m thinking: is there a way to insure yourself individually? This is absolutely a thing to insure against: very low chance, very devastating consequences. Next to Haftpflicht and Health Insurance, Financial Institution Fraud insurance should be something you want to have. But as far as I know, there isn’t one, or?
Btw I am as much afraid of the broker committing fraud, as I am of a hacker wreaking havoc on my portfolio, or even of a glitch in the system that would screw with the position keeping.
I tried to google that but I get garbage back. I might try with german words that are more precise.
Some RC insurances have clauses about internet stuff but they are limited.
Thanks for these informations, I will never stop learning! I need to have more knowledge about all of this stuff and probably will invest some of my time to improve
But it only protects you against such things as identity theft, credit card violation, online shopping, data loss. Nothing about broker or even bank account.
from reddit:
The SIPC fund has access to 6 billion. The larger US brokers covered by SIPC have trillions AUM. Even IB as a smaller US broker has about $160 billion AUM. If IB pulls a Bernie Madoff, how exactly will the SIPC fund pay out $160 billion from $6 billion cash and credit line? The $30 million insurance is meaningless if they pull a Bernie Madoff as it has “an aggregate limit of $150 million”.
[note from me: like our bank insurance for 100k CHF…]
I still would like to know how much is really transferring stuff to SQ and mainly which kind of insurance SQ has. I suppose none. Maybe the safest bet is to move all back to PF if they didn’t have implemented those new costs.
Cash is secured in both cases by Esisuisse. Whereby the size of PF might be a disadvantage because Esisuisse is limited to 6bn chf.
The e-trading platform of PF is actually run by SQ, they look the same and they are the same (link). Quote: “Swissquote is responsible for custody account management on behalf of PostFinance.”
So if SQ loses your shares, you would suffer from it also as a PF customer. In both cases, you’d probably have to drag either broker to court and fight for your money. Or, since such a case might attract bad press to Switzerland’s financial sector, the government might step in anyway.
I don’t know what your FIRE number is, but I would guess >= 2’000’000. It does not seem crazy to me to split such an amount between several brokers.
I personally start to feel uncomfortable when I have more than 500’000 in a single place. If I need 4 brokers to feel safer, I will pay the extra cost. I see it a bit like an insurance (I don’t lose everything in case of a disaster but I have to pay an extra for this).
My fire number is 1m. Broker cost when splitting is a secondary issue for me. Simplicity and minimalism is the most important. I would really not like to have to split between 3-4 brokers.
JLCollins keep everything at Vanguard and he wrote a blog post about it.
Can you explain what you mean by “SQ loses your shares”? Contrary to other Brokers SQ doesnt make securities lending with your shares and your shares are not part of SQs bankrupt estate, since they are only hold in your name there.
They write in their faq: “Swissquote Bank Ltd holds a banking licence and is therefore subject to the supervision of FINMA (the Swiss Financial Market Supervisory Authority). Swissquote Bank Ltd is a member of the Swiss Bankers Association (SBA) and a signatory of the Depositor Protection Agreement. This agreement provides each bank creditor (Depositor) with immediate protection of up to an equivalent of CHF 100,000 for cash savings should a bank become insolvent. Should Swissquote Bank Ltd become insolvent, securities are fully guaranteed if they are held by the respective custodians in your name.”
I was referring to this post linked below and the discussion about SIPC protection for IB customers. And what would happen if something irregular occurs at a Swiss brokerage firm. And whether PF might be safer than SQ.
Contrary to what brokers? In the developed world afaik all brokers are required to segregate client assets from their own
The problem is that such custodians typically don’t track actual owners / final beneficiaries of each share. American DTCC doesn’t, in particualr. They just know that swissquote had X shares at the end of a given day. How much each customer owned or shorted is generally up to swissquote’s internal bookkeeping to track. Should they fail at that (e.g. software/backup failure, incompetence, ransomware, natural disasters, wars etc) or outright falsify the data, the number of shares might not add up to X. If shtf, there would likely be a long painful multi-year investigation, some scrapegoat might go behind bars, but you are not 100% guaranteed to see your shares as said custodians don’t have the power to create missing shares out of thin air
This stuff is super scary. I guess it also applies to banks, with the difference that the central bank could print more money to “protect system stability”, but you can’t print more stock.
I wish some big insurance companies would insure against this “accounting mismatch”. They could regularly source data from the stock exchanges and the broker and see that it all adds up.
What other alternative is there? Maybe they could store this data on the blockchain? Just so you know that the shares you own are real.
This could also happen further up the chain and not only at your own broker.
Your broker knows how many ETF units you own. But which and how many shares there are in such a unit, and in case of a physically replicating ETF, where these shares are stored, that’s another story altogether.
I’m a SQ client since early 2000s. Once SQ was the online trading attacker to the big banks and was the only alternative, now it’s just one of many.
My issues with SQ (I’m quite pissed off):
Expensive, feels like a rip off (e.g. currency conversion, fees) compared to what IB offers
technical issues (latency, trading platform, mobile app, inaccurate prices; had several tickets open the last few months)
bad spreads on forex trading and just a handful of pairs
Last year, I opened an IB account, put some cash on it and tried to place a trade. I couldn’t figure it out. I wanted to buy some ETFs, shares and open some cfd forex positions. I remember having a lot of questions asking me stuff and forms to fill. I’m absolutely not a rookie trader, but that scared me quite a bit. I didn’t have a lot of time to invest to find out how it’s done and after several weeks I gave up trying. Compared to SQ, IB is quite complex (or I’m just dumb).
After several head aches with SQ and seeing the amount of fees I could have saved, I’m giving it another try (maybe due to corona caused extra free time).
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