Am I overreacting or are you also upset about the low investor protection in Europe? 🇪🇺Interactive Brokers: angelo.fi/ibkr 🇪🇺Trade Republic: angelo.fi/tr 🇪🇺Scalable Capital: angelo.fi/sca 🇦🇹🇩🇪Germany & Austria only: angelo.fi/atde 👉Compare ETFs: angelo.fi/comp ⚡Where I buy crypto: angelo.fi/bit 💶4% interest savings account: angelo.fi/save
Agree with everything. To add a bit of context, cash in banks is part of the balance sheet of the bank. So if they go bankrupt, it is considered part of the assets/liabilities of the bank. As you explained, that is different for brokers with separate accounts. If protection for cash should be 5x, 10x or more the protection of equities that is an interesting discussion. Best would be 1) option for cash to be depositied directly with the ECB at return that ECB is paying for cash to commercial banks 2) significantly higher protection for stocks held in brokers (at least 50K)
Very well done Angelo, someone at last needed to talk about this!! On one hand European states progressively raise retirement age limits and pass on the responsibility and risk of building a viable retirement fund to citizens (which one can argue is reasonable to a certain extent) and one the other hand EU and the states do not provide the tools to people (such as sufficient capital guarantees) so that they feel safe enough about their hard-earned invested money. Something needs to change rather soon!!
Nobody, no government anywhere in the world will guarantee your investments. You invest in the stock markets, equity, bond funds etfs etc at your own risk. If the index crashes that's life, you just have to wait for it to hopefully recover. This video is a bit misleading. If your etfs closes I've been told you will be given prior notice and you can cash it in before it closes or wait for it to close and the etf provider should return your money.
@@fredatlas4396 You have no idea what you are talking about, which is even more astonishing given that the video clearly explained the risk. The problem is not about "index crashing" or if "ETFs close" but if your broker committed fraud and then is not willing (or rather not capable) to correct the fraud. To give a direct example: If you have invested 300k in e.g. a MSCI World ETF via Interactive Brokers (IB) you run the (theoretical) risk that IB committed fraud while investing the money. What does that mean? Well, you think you have 300k in the ETF but actually IB used the money (in a fraudulent way) to do something completely different, e.g. to pay its executives a bonus or something else (does not matter what, it just matters, that it did not use the money to buy the ETF shares). Now, if IB were to go broke in non-fraudolent scenarios this would not be an issue, since your ETFs would be separate from the brokers assets. But in this case you do NOT have the ETF shares, you only believed you had them since IB made you believe so (fraud!). In fact you do not own any ETF shares and since IB went broke it cannot compensate for the fraud one of its employees committed. In that case the only thing you will get back of your 300k are 20k in Europe (!!). That's it - this has nothing to do with how indices go or whether ETFs are "closed". Simply the fraud protection in the EU for these cases is just 20k.
Hello Angelo, this was literally my main concern when I started (2 month ago). Because when I think of a long term investment(40 years), security is the number one priority. It's very odd that so many youtuber investors are talking about, "best ETF" "low fees" "best broker" but then miss the most important factor, to have your money in the end.. thank you. Saved the video for the future to rewatch!
Indeed. For me it’s comparable. Even asked some financial consultants. They didn’t talk about thinks I didn’t ask them directly. Most taxes I found by research by myself. It’s seems like they all want people to invest in Bausparer only.
On my so far short journey in studying about long term investing, you are hands down my favorite youtuber in this space. Always waiting for your next video, while scouring all the previous ones.
Thanks for another great video Angelo! Could you please do one on UCITS ETFs? I'd like to know why our expense ratios are so much more than the ETFs in US. Take care!
Grateful for this analysis. It is actually very hard to find credible info on this, especially on 'what if' scenarios. I think it is also important to mention that IB cover DEPENDS on your location, some fall under Ireland, others under Hungary/Central Europe. Central Europe accounts do actually cover 100.000 EUR in contrast to Ireland's 20.000.
@@AngeloColomboFi I think they are still in the transition process, but the direction of travel is clear (towards Ireland, meaning 20.000 only) and definitely not in the interest of investors :)
I think in this case it depends, a lot of investors complained about having their investments in Hungary and not being able to use certain features due to limitations. I remember plenty of threads on Reddit with people wanting to move from IBCE to IBIE
In Europe, they just want you to put your money in the banks so that they eat it twice, once by heavy Tax you pay and secondly by inflation they are responsible for !! Thank you very much for touching on that sensitive topic. I subscribed to your channel after watching this video
Thanks Angelo. Very well explained and indeed surprising that in Europe the protection is only 20k. I suggest you do a video around how ETF dividends are taxed.
Thanks for addressing the topic many of us wanted to understand better. I wanted to understand this and saw people discussing this topic on reddit. I have shared this video with those subreddit forums.
Here in the UK which is no longer in the EU for some time now, you get up to £85000 protection for each bank account or investment platforn you have, but if your investments do very badly there's no protection for that. And if the 2 banks you have money in for example are both owned by the same company, Part of the same business you only get £85000 protection over both not £170000. Plus ETF,S aren't covered under the UK Fscs government scheme. Plus no government anywhere in the world , nobody will compensate anyone for loses in their investment if the index, stock etc crashes. You invest at your own risk. And the money in your account is kept separate from the brokerage company
Thanks for all your vids mate! Great to have a channel focusing on Europe. Really helpful and definitely will change to ibkr as well from DeGiro. Also going from vwrl to vwce with a big lump sum investing that we hopefully can do soon and from that moment coastfire :). Greetings from Spain!
Great topic, Angelo! I am just wondering, which brokerages are the wealthy families investing their millions or billions into stocks/ETFs without the fear of losing their money!?
Very nice video, I was searching for this information and I feel it is unfair to only have 20,000 EUR investor compensation scheme !! Thank you very much for this video
Investor protections should not exist. It's just bailing out people with tax payer money. I really don't understand how you would think increasing deposit guarantees should be a positive. Since the deposit guarantee fund has very limited funds it is maybe enough to cover 1 or 2 small banks, anything above that would need to be pitched in by the ECB, which would cause massive inflation.
the 100k€ is actual just for the "cash" that you have deposited at said broker... In germany at least, your stocks/Etfs/bonds etc are not part of the "insolvenc-mass" if said broker would go bankrupt, the stocks are fully OWNED by you, yes the stocks are stored at the Bank-depot like "baader bank" or others, but they are "Sondervermögen" and therefore cant be used to pay debts the broker or bank has... funnily enough, there is only one broker that i know of, where the stocks etc... arent "sondervermögen" and thats "interactive brokers" xD which is tbh kind sad, since it offers way more stocks and bonds be it mexican, indian or generally more stocks from "non-Western" countries
What you're talking about are segregated accounts that exclusively belong to customers, it's the same on German brokers and IBKR. In either case they're protected from bankruptcy. Make sure you double-check whatever source you got that info from, as it's nonsense.
tbh i dont know if im 100% right because there is no clear answer in various german forums, but thats how i interpret the law any many others so dunno @@AngeloColomboFi
Thats true. Only your Cash assests are above 100k in danger if the Bank got bankrupt. If your assests are All in ETF, they Do not belong to the Bank and are untouchable. So, I dont know why making a Big Deal about it. And even if you have over 100k Cash - just Split it and deposit it to different banks.
This is even more joke if you consider how much effort was put by EU to implement PRIIPs/KIDs regulation to "protect" investors. Which in reality protect you totaly in many cases - from making any investments into ETFs. But you can still buy single stocks from the same ETF.
Just like removing our option to be SIPC insured up to $500K on IB after Brexit and forcing us to take the €20K protection instead. Clearly in our best interest 🙄
It's actually crazy like. In cryptos YOU are the one that HOLDS the key. In stocks. It's some random website. I think trading overall in Europe should be more open and I wouldn't be mad if there would actually become like EU wide tax structure. We already share the same currency, we can move freely, now it's time for more improvements. Because for example in my country (Finland) it's literally crazy to trade for example CFDs as a individual because you can't take from the taxes if you lose a trade. Instead we have to go look for other options and futures markets like the e-mini s&p500.
From what I've been reading, assets in IBKR and most brokers are not really in your name, but rather in "street name", so what the video says in terms of custody is misleading. Your name is not on the registry when you buy something, but instead, the name of the broker appears. So while one has the right of ownership, one doesn't have true ownership. Since only the broker has internal information saying who owns what, if they go bankrupt...I've also read that some brokers do give you true ownership, but they are a lot more expensive. You can request to have them held in your name directly (not with IBKR apparently), though this is unusual and may impact the services available to your account.
Any insight on how that affects business accounts that have LEI? I'm just guessing, if you're right, that true ownership you can get buying shares through every-day 'true' banks that charge you like 20 euros for transaction.
With ETFs there is no way to have your own name show up all the way down the custody/depository chain or if there is, it's prohibitively expensive. However, you are the ultimate beneficial owner of the shares. A broker going bankrupt doesn't change anything, your shares remain yours and can't be touched. The only exception is if fraud is involved, which is why you should pick well-regulated options that are regularly checked.
Very informative video, thank you! What do you think of the relatively new investment broker Lightyear? Everything seems good on paper but would you trust it for the next decades? Perhaps even making a video about this!
I don't think that the risk is such: the stocks (including ETFs, I guess) are in a different accountable note outside the broker balance, so this compensation only applies for the deposit and funds that you have got on the broker (i.e. the cash you have there not invested).
Yes, your assets like stocks and ETFs exclusively belong to you, so you should never need to make use of the low 20K investor compensation. It would only be relevant if the broker were to commit fraud and your shares could thus "not be found" in case of a broker bankruptcy. If you stick to strictly regulated brokers in Central Europe (eg. IBKR, Trade Republic etc.) this risk should never materialize.
Looking at Degiro , it is written that : flatexDEGIRO Bank Dutch Branch, trading under the name DEGIRO, is the Dutch branch of flatexDEGIRO Bank AG. flatexDEGIRO Bank AG is primarily supervised by the German Financial Supervisory Authority (BaFin). In the Netherlands, flatexDEGIRO Bank Dutch Branch is registered with DNB and supervised by the AFM and DNB. So i assume it is properly regulated/monitored in case of a fraud 🤞
Please note that in Europe is commonplace, for an investor, to have two or more bank accounts. Usually the first one is with a traditional "physical" bank and the second one is with a "modern", "virtual" or "digital" one. Moreover, it is quite common to have one or more trading account with one or more broker, beside the bank accounts. The typical european investor has only 30% - 70% of its money invested in financial instruments (liquidity, ETF, stock and bonds). The rest is usually invested in real estate, physical Gold and other "physical" instruments. A few investors also have *foreign* (and legitimate) bank account, usually in US$ or Swiss Francs.
He probably knows, as he's also from Europe. Besides, 2-3 bank accounts don't protect your 500k investment in securities/ETFs, you'd only get 20k each. In the US, you wouldn't have to worry at all about having 500k at one broker.
Flatex has no share lending, is profitable and is a publicly listed company (FlatexDegiro), therefore they're a great option! The broker itself is still separate from Degiro, which they acquired.
I personally stopped with Trade Republic's 4% interest rate a few days ago. As far as I know, this is still under partner banks and not under their own banking license. I, and all my acquaintances, fall under Citibank, German Branch. This bank is covered by Ireland's deposit guarantee scheme. Ireland only issues checks for the deposit guarantee scheme, these are no longer legal tender in the Netherlands since 2011. I contacted Trade Republic; there is no way to switch partner banks. In addition, I have contacted the DGS in Ireland; they indicate that checks are still the only possible means of payment. So the Irish deposit guarantee scheme is pretty much useless to us. I guess it's useful for others to be aware of this and check for themselves if the same applies to them.
I understand, hopefully they'll be able to run everything through their own bank soon and we can forget all about this. My account is with Deutsche Bank in Germany, but I wouldn't be too worried about Citibank either, as it's one of the largest banks worldwide and likely systemically important. But of course I'd also be pissed if I had to find a way to somehow get my money back via cheque 😅
@@AngeloColomboFi Yeah, I hope Trade Republic will start using its own banking license soon. In any case, I'm still excited about the future of Trade Republic and look forward to the payment card.
@@MrSunys You can check the BIC in the app when you click your letter circle in the top-left corner. The BIC is below the IBAN of your account. CITIDEFF = Citibank. I am not sure about other BIC's, but a simple Google search should give you an answer.
Going to report on the card as well soon, just got mine a week ago here in Austria! As an affiliate I got mine early so that I can test it out, I think they're only starting to roll it out in countries other than Germany now
Yes, but only if you're based in the UK. EU customers fall under the Cyprus regulation and the €20K compensation in that country. Again, everyone has their personal preferences with these decisions, which is totally fine!
Governments always support banks that's why the compensation is way larger. They don't want people taking cash from banks and investing it with brokers.
I remember when I first registered on DeGiro and saw this 20k thing that it shocked me :/ I did not look up how it would compare to the US, but just remember feeling very uneasy about it, and agree that it makes no sense that it's so much lower than the deposit guarantee...
EU investor landscape is dominated by institutional investors, as Europeans are generally savers not investors. Whereas in Australia if a broker goes bust they transfer your shares to another broker.
I still dont understand wholly all these but your each video is helping me a lot and im going to start investing soon, my goal is not to be billionaire but be able to travel comfortably with my husband ❤
Hi, great stuff. That was the first thing I was questioning after getting some first money to invest. The second is how to crate payout "structure" to have smallest amount of money being spend on taxes when we retire early.
My advice to everyone is this : if you want to grow big this year especially in your finances. Be willing to take risks. Saving is great but taking risks puts you on a pedestal where you wouldnt have to worry about savings as you do now. Thanks to larysa Caba, my portolio is doing really great and im proud of the decisions i made last year.
I already knew these numbers, but I'm glad you put the info out there for everyone. It's really annoying. As you said, this basically is like the EU sending a message that investing is bad, and we are gamblers not deserving proper institutional protection for investments. Then they wonder why the European economy is not growing more (among other reasons as well)
LIghtyear: Your US securities are held with our partner Alpaca, who is FINRA regulated and a registered member of the SIPC. This means your US securities are protected up to the value of $500,000 should Alpaca fail. + Yes, all Lightyear customers have their assets covered up to the amount of 20,000 EUR by the Estonian Investor Protection Sectoral Fund.
My pleasure! I talked about it in these two videos: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-HCwoH-W25bQ.html and ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-b_TXq9H8prQ.html
Is Interactive broker Europe a separate entity from the US one? In other words, are we being taxed twice from Interactive Broker(once for US taxes and secondly we ALSO pay local taxes? (by the way, you can open a LLC entity in the US with $200 and invest your funds under the LLC)
Thank you for the video! I kept looking info for this topic but there wasn't someone talking about it in more detail. My only question is: who funds the 20.000 euros if the broker bankrupts?
Very nice and important video to discuss and highlight to European investors. Thank you for summing this up. Very valuable video!👍 And let me ask if you know, is it possible to transfer stocks and ETF's from eToro to Interactive Brokers ? I'm asking as I plan to move all to IBKR exactly because of todays discussed topic from you. Thanks in advance and continue with the good work.🙂
Thank you David! Sadly it doesn't seem like you can transfer anything from eToro: "The eToro investment platform is NOT an exchange or a marketplace, and it is therefore not possible to initiate a stock transfer between eToro and a third-party venue (and vice versa). This means that all positions that are opened with eToro must be closed with eToro."
@@AngeloColomboFi Thank you very much for checking on this and sharing the info. Only it is a sad thing since I would need now to close all positions and pay for capital gain and only then buy the same on IBKR. But it's still some gain, right...and we learn each day something new. 🙂
So would it be a good option to open an account with a US-based broker? And if we buy stocks via Interactive Brokers but in the US market, would it be a different scenario?
Thank you, Angelo, for speaking up about such an important financial topic. What about the Italian broker Directa? Is it comparable to Trade Republic or IB in terms of reputation and solidity?
I get that we have 100,000 EUR guarantee in EU banks and 20,000 EUR guarantee for other assets in EU brokers. I still do not get how much guarantee we get for cash in brokers (IBKR) - 20,000 EUR or 100,000 EUR?
Hi Angelo, i am down from 40 PAC to 30 PAC, i ve taken off us stocks pacs since i found out there are double taxation of the profits from them us and italy, i countinue to keep us based etf's i hope this double taxation issue isnt the case for them like indiviudual stocks and i stopped buying cryptos now buying only crypto etfs
I think you should still be able to use IB if you're 18 or older: angelo.fi/ibkr "The minimum age to open an account is 18. Customers between the ages of 18 and 21 are eligible to trade stocks in a Cash Account provided they meet all other requirements."
Thanks for that Angelo. I knew nothing about this topic. I’d like to ask you what’s your take on socially responsible investing. You don’t hear a lot talking about ESG anymore and I’m concerned with “green washing” frankly. Do you know for example any good green ETF (for example in renewable enwrgy sources) that might perform well from a risk/reward standpoint? Green bonds, to my knowledge, don’t offer great returns compared to even other bonds so there’s only the “altruistic” element that justifies it as an investment. Thanks!
I'm not a fan of ESG investing, because the rules regarding which company is considered "good" or "bad" are changed all the time and seem to really be personal preference of the index providers or fund managers. Some funds even exclude Tesla for political reasons. There's a reason why ESG investing is pretty much dead in the US, it's just Europe where this keeps getting forced on us by the EU. I definitely don't think there's a reason to believe ESG investing would lead to better long-term returns vs. just passively buying the market as a whole
Why should investors be better protected then a plumber, who is doing his work for a corporation that is going bust? The law in germany prohibits him from collecting the mateirals he already used to protect the debtors collective. The 100.000 Euro protection of bank accounts is necessary to make banking viable in the first place. And having banking is of vital interest for the state.
You have more money in your pension than in your bank account. That’s why investments should be better protected than bank accounts. Can’t give any insights on plumbers cause I dont know anything about that business.
My pleasure! Do you mean connecting your broker to Getquin? I do think so, but I'm a bit paranoid when it comes to security, so I still track everything in Portfolio Performance first and then import the csv files in Getquin so that everything is a lot nicer to look at and track
Full shares are entirely yours and fractional shares (eg. 0.33 shares if you hold 170.33 for example) are also legally yours and protected, but Trade Republic has to buy the full share itself and assign the fractions to each investor in its own books.
But if the ETFs are deposited in your name in a separate institution e.g. HSBC in the case of Trade Republic, the only way the investor compensation scheme would ever apply is fraud. If someone were worried could they not independently contact HSBC (or whomever is holding the ETFs) and verify that what they have in reality matches what the broker tells them?
Yes, fraud is the only scenario where this would ever be needed. So it's close to impossible for any of us to ever need to make use of the €20K insurance when using well-regulated brokers. I still think the insurance amount should be increased significantly to add an extra layer of safety, as is the case in the US. Sadly that's not possible for us, but regulators regularly review that the amount of assets held at the depositories match client assets on brokerage accounts.
There is a second risk for us EU investors, that is the Euro/Dollar currency risk. How can I limit this risk? My ETF portfolio consists of IWDA and EMIM, what is your view on this?
It's both a risk and opportunity, as you're investing into thousands of stocks operating in different currencies. Trying to hedge against it makes no sense in my opinion when investing globally, unless you're convinced the EUR will be the best performing currency (which I certainly don't)
I've grappled with this exact phenomenon for years. Crossing the threshold of investing more than 20,000 in a single broker has always presented a psychological barrier for me. As a result, I've found myself diversifying my capital between two brokers and a savings account. Additionally, I strive to minimize the amount of money I keep in my regular banking accounts due to their interest rates significantly lagging behind current inflation rates.
Im a little bit confused here, so if I own stock or ETFs shares in Europe in value more than 20 000€, lets say 40 000€, those will still be mine even though a broker bankrupts? Since you said that we own the stocks (I use Revolut mostly and it says I'm beneficial owner, not registrated owner??). So this 20 000€ don't bother me??? But if I have lets say 40 000€ in ETFs shares or stocks and 25 000€ in investment account as cash, then in case of bankruptcy from this 25 000€ cash I can get only 20 000€. Did I understand correctly? Also is Revolut good for investing?? Thanks
Thank you for this video. You cover a very important topic that is rarely discussed on YT. I am currently using etoro. What do you think about this platform? Shall I diversify using another broker to spread the risk? Thanks a lot for your insight.
eToro is in my opinion one of the worst platforms for long-term investing. It's based in Cyprus, a country known for limited supervision of financial institutions. You should watch Angelo's video called 'The BEST BROKERS for Europeans in 2024 (ETFs & Stocks)'. He also addresses eToro in that video.
You're very welcome! Etoro wouldn't be my first choice long-term, I talked about why here: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-4B05bx3pHT8.html
I mentioned Freedom24 here: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-4B05bx3pHT8.html I wouldn't feel comfortable holding more than €20K there personally, but that's just my personal opinion
Angelo is there any “central authority” that we verify that INDEED all the stocks in IBKR belong to us? I know if we ask the company will tell us that you can transfer them and it’s enough. BUT I want someone ELSE from central authority to verify from OUTSIDE of the company to verify what exactly holdings are registered in my name. Is it possible?
This sounds kinda crazy! Isnt it GBP 85k in the UK, which I still find a bit limited but still way above eur 20k? No wonder some eu countries dont invest much as a proportion of the population then.
