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Degiro best/easiest option? Safety and other questions

Financial discussion for any financial queries for Expats
ExpatBill
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Degiro best/easiest option? Safety and other questions

#215812

Postby ExpatBill » April 18th, 2019, 5:32 am

I've been looking around this board (very helpful!) and other places for a good way to invest some of my savings that are sitting in the UK and earning very little interest. Since most of the cool robo-investors and fintech apps aren't available to non residents, it seems to basically come down to Degiro or Interactive Brokers.

I looked at IB a couple of years back, but never actually got around to doing it because it was complex and because I wasn't keen on the idea of inactivity fees. So, at first glance, Degiro seems perfect.

Background info: Been in Japan for 10 years, but don't have many investments here. Have lots of savings in the UK in things like ISAs that aren't very efficient anymore. Paying UK pension. Not sure if/when come back. Initial investments would probably be quite small, but want to get something started before more time passes.

So I was thinking something like Vanguard-ish ETFs on Degiro would have low fees and be pretty 'set-and-forget' and flexible. Plus easy to set up.

Questions:
1 - Is Degiro safe and reliable?
It seems to be well known and have pretty good reviews from reputable places, but there also seems to be a lack of info about the companies behind it and operations.
AFAIK it's covered by Dutch/EU Government schemes up to 20,000 Euros, which is lower than the UK but I'm unlikely to hit that limit soon. But also they do something with a separate holding company and with possibly lending out your shares which is a bit confusing to me. Just wary because there was another company in the UK that went under recently where people *thought* they were covered and it turned out they weren't.
If I understand correctly, if i buy ETFs and Degiro goes bankrupt, those are still mine and still on the exchange, right? (Unless they lent them out?)

2 - ETF locations?
I'm a bit confused on this as it seems they offer ETFs based in the UK, Ireland, EU, etc..
Income in the UK up to 10,000 is tax free now, right? So would it be best to invest in UK based funds to avoid issues such as exchange rates, etc?
Ireland also seems popular, but if i invest in an irish based fund does that mean it's in Euros, even if it's tracking the FTSE or SP-500?
Do non-UK based funds have any tax benefits/drawbacks?

3 - Currency exchange fees and changing rates?
At first glance their fees seem great, and they offer fee-free ETFs as well. But looking closer, those fee-free ones are all in Euros, so there'd be a currency exchange fee both when investing and when withdrawing. That'd push up costs. Would that make UK based funds more attractive?
Given how volatile currencies can be, I'm a bit wary about that wiping out any profits.
Can someone clarify how exchange rates might come into play if, for example, I have a UK Degiro account, and I buy an Irish-based ETF tracking the UK stock market? How about an Irish based ETF tracking the US stock market?

4 - Very newbie question: How is Brexit likely to affect / not affect all this?

Any other advice, recommendations or suggestions would be much appreciated.
Thanks in advance!

torata
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Re: Degiro best/easiest option? Safety and other questions

#215946

Postby torata » April 18th, 2019, 1:42 pm

Three points from me:

- SVS XO is UK online broker dealing in FTSE350, AIM and most ETF that are GBP denomitated (plus some others), and they are open to expats. Typical hoops to jump through. https://accounts.svsxo.com/account-summary

- "Have lots of savings in the UK in things like ISAs that aren't very efficient anymore" - Cash ISAs, I presume? Have you investigated whether you can open, then transfer them to S&S ISA? I imagine that it could be easier if the ISA was with somewhere that offered both savings and S&S ISAs.

- On the subject of ISAs, have you thought of opening a Japanese NISA with online broker in Japan?

torata

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Re: Degiro best/easiest option? Safety and other questions

#216568

Postby ExpatBill » April 22nd, 2019, 6:00 am

Thanks for the reply.

I'd heard SVS XO mentioned as the only 3rd option, but also heard they were the most awkward to open accounts with, and the ease of opening a Degiro account was a big selling point.
I'll investigate though.

If you know, could you give me a very quick rundown on how currencies for things like ETFs work?
Is investing in any non-uk ETF/Fund going to be subject to the whims of exchange rates, or are there such things as funds that invest in US markets in GBP? Is the currency of the ETF always tied to the location of the market?

I'd love to move my Cash ISA to a S&S ISA, but I was under the impression it wouldn't be possible to open an S&S Isa now I'm overseas.. which is annoying.
If it is possible, I'd love to hear of it.
I'm always a bit wary of asking my UK banks about such things directly incase they start kicking up a fuss about me being overseas.

I am indeed looking into Japanese NISAs, although they seem rather complex. That'd probably be more of a start-from-scratch thing though, as transferring a big bunch of my savings from the UK to Japan isn't something I'm keen on right now.

stevensfo
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Re: Degiro best/easiest option? Safety and other questions

#216600

Postby stevensfo » April 22nd, 2019, 12:03 pm

ExpatBill wrote:I've been looking around this board (very helpful!) and other places for a good way to invest some of my savings that are sitting in the UK and earning very little interest. Since most of the cool robo-investors and fintech apps aren't available to non residents, it seems to basically come down to Degiro or Interactive Brokers.

I looked at IB a couple of years back, but never actually got around to doing it because it was complex and because I wasn't keen on the idea of inactivity fees. So, at first glance, Degiro seems perfect.

Background info: Been in Japan for 10 years, but don't have many investments here. Have lots of savings in the UK in things like ISAs that aren't very efficient anymore. Paying UK pension. Not sure if/when come back. Initial investments would probably be quite small, but want to get something started before more time passes.

So I was thinking something like Vanguard-ish ETFs on Degiro would have low fees and be pretty 'set-and-forget' and flexible. Plus easy to set up.

Questions:
1 - Is Degiro safe and reliable?
It seems to be well known and have pretty good reviews from reputable places, but there also seems to be a lack of info about the companies behind it and operations.
AFAIK it's covered by Dutch/EU Government schemes up to 20,000 Euros, which is lower than the UK but I'm unlikely to hit that limit soon. But also they do something with a separate holding company and with possibly lending out your shares which is a bit confusing to me. Just wary because there was another company in the UK that went under recently where people *thought* they were covered and it turned out they weren't.
If I understand correctly, if i buy ETFs and Degiro goes bankrupt, those are still mine and still on the exchange, right? (Unless they lent them out?)

2 - ETF locations?
I'm a bit confused on this as it seems they offer ETFs based in the UK, Ireland, EU, etc..
Income in the UK up to 10,000 is tax free now, right? So would it be best to invest in UK based funds to avoid issues such as exchange rates, etc?
Ireland also seems popular, but if i invest in an irish based fund does that mean it's in Euros, even if it's tracking the FTSE or SP-500?
Do non-UK based funds have any tax benefits/drawbacks?

3 - Currency exchange fees and changing rates?
At first glance their fees seem great, and they offer fee-free ETFs as well. But looking closer, those fee-free ones are all in Euros, so there'd be a currency exchange fee both when investing and when withdrawing. That'd push up costs. Would that make UK based funds more attractive?
Given how volatile currencies can be, I'm a bit wary about that wiping out any profits.
Can someone clarify how exchange rates might come into play if, for example, I have a UK Degiro account, and I buy an Irish-based ETF tracking the UK stock market? How about an Irish based ETF tracking the US stock market?

4 - Very newbie question: How is Brexit likely to affect / not affect all this?

Any other advice, recommendations or suggestions would be much appreciated.
Thanks in advance!




Just an idea, but this particular board is not visited as much as the others so you may want to re-post the same question over in 'Investment Strategies'? I say this because your questions are interesting and would stimulate debate. If another board is more suitable, one of the Mods will advise you.

The tax free allowance is currently 12,500 pounds. Then you are allowed to earn 1000 pounds tax free from savings accounts etc. So if you have 50,000 in a savings/fixed-term account paying 2%, you get it all gross and don't pay tax. Most cash ISAs are terrible value at the moment and in real terms (after inflation), you lose money! As non-resident, if you already have a self-select ISA set up, you could legally transfer your cash ISA cash to it. You are also allowed 2000 tax free from dividends.

It's been discussed many times, but the take-home message about living abroad is to be squeaky clean about taxes, tax declarations etc, but never tell the UK banks that you've left. Wherever possible, keep an address for correspondence (parent, brother, sister etc, best if same surname) and have as much as possible sent there. In my experience, depending on who you tell, you may get anything from a shrug and friendly advice to a horrified look that screams money launderer and terrorist followed by your account being closed immediately and the SWAT team called :-)

Steve

torata
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Re: Degiro best/easiest option? Safety and other questions

#216630

Postby torata » April 22nd, 2019, 3:57 pm

ExpatBill wrote:I'd heard SVS XO mentioned as the only 3rd option, but also heard they were the most awkward to open accounts with, and the ease of opening a Degiro account was a big selling point.
I'll investigate though.


I did it when over in London as it seemed easiest. Didn't need to have notarized copies. They just took photocopies. They have no platform fees, so it's just dealing fees.

ExpatBill wrote:If you know, could you give me a very quick rundown on how currencies for things like ETFs work?
Is investing in any non-uk ETF/Fund going to be subject to the whims of exchange rates, or are there such things as funds that invest in US markets in GBP? Is the currency of the ETF always tied to the location of the market?


I'm not sure how much investing you've done so apologies if this is already known.
Very simply...
- Buy ETFs on the LSE, but based in Dublin. If you buy UK based ETFs, then dividend income will be counted as UK (dividend) income.
- Buying on the LSE, the ETF will be priced in GBP, even if underlying asset is priced in dollars (or whatever)
- However, the dividends may come into the broker in GBP or in USD depending on the ETF, so if it's USD, then the broker may charge you an exchange commission.
- You'll carry the currency risk somewhere unless you buy a hedged ETF, in which case you're paying for the privilege.

A good example is the iShares list of global ETFs
https://www.ishares.com/uk/individual/en/products/etf-product-list#!type=emeaIshares&tab=overview&view=list&fac=43511&fr=43520
You can see what's in what currency and hedged or not.

Personally, curency risk is not something that I worry about when buying ETFs.


ExpatBill wrote:I'd love to move my Cash ISA to a S&S ISA, but I was under the impression it wouldn't be possible to open an S&S Isa now I'm overseas.. which is annoying.
If it is possible, I'd love to hear of it.
I'm always a bit wary of asking my UK banks about such things directly incase they start kicking up a fuss about me being overseas.


I've not tried it, but my ISA provider, who know I'm overseas, wouldn't let me open up a standard dealing account, but every year they encourage me to transfer my Sipp to them. I suspect it depends very much on each institution. You might be able to do it as a 2-step operation - transfer your cash Isa to a cash ISA with an institution that also offers S&S, then transfer your cash internally within the institution from cash to S&S.

ExpatBill wrote:I am indeed looking into Japanese NISAs, although they seem rather complex. That'd probably be more of a start-from-scratch thing though, as transferring a big bunch of my savings from the UK to Japan isn't something I'm keen on right now.


And not something I'd want to do either.

NISAs are relatively simple (providing you are OK filling out a bunch of forms and can work your way through a dealing screen in Japanese).

Again, from my experience...

- banks will only sell funds, and they are often just rebadged ETFs/ETF packages with double charges and slick marketing. Online brokers are the way to go.

- NISAs were designed as lost cost entry to people to start investing long term, and the structure forces that. It's a true "wrapper" that stays around the investment bought in that year for 5 years, then it falls away from that investment, leaving it as a taxable investment. So once you've bought something in the NISA wrapper, if you sell it during the 5 years then you lose that wrapper. So it's not like a UK ISA, which is more of a tax free account, with unlimited buys and sells within the account.

- Investment limit is only 1.2m a year (for "ippan"), so a similar amount to ISAs when they first started. I can't see the point in the "tsumitate" NISA - a "lifetime"-style ISA - because yearly investment limits are pretty rubbish and you have to keep that investment for the full 20 years or lose the wrapper.

- When you set it up, you set up a standard taxable account first, then the NISA is "attached" to it. NISA will look like a separate dealing account though. If you set up standard account as "tokutei", then the broker does all the income tax and capital gains deductions for you (e.g. after your investments fall out of the NISA), so there's no need to do a tax return.

- I stick with ETFs. But there are actually not that many ETFs compared to the UK. There's a list in English on the TSE website.

- However most online brokers will allow you set up a USD account and then buy ETFs (and shares) in the US. There's a tax treaty between the two countries so tax rate paid on dividends in the US is 10%, then 20% in Japan, but you can offset the Japan tax if you fill in a Japanese tax return. You can even buy US shares and ETFs in the NISA wrapper, but I assume that saves you only from the Japan taxes. Not sure if capital gains is also levied in the US - not got that far yet.
Vanguard Japan for example direct people to buy their US based ETFs, and only offer a package of ETF funds retailed through a couple of banks.


Online dealing charges in Japan are almost nothing - less than a cup of coffee - and there's basically no stamp duty, so as the broker does all your tax deductions, you can imagine that it's a real draw for churning your own investments. So it's not a surprise to find that by far the most actively traded ETFs are the leveraged ones.

HTH

torata

boris88
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Re: Degiro best/easiest option? Safety and other questions

#216763

Postby boris88 » April 23rd, 2019, 10:12 am

You could also look at Saxo Bank and Internaxx.
They offer support for all major exchanges and I have used them both with no complaints.

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Re: Degiro best/easiest option? Safety and other questions

#217138

Postby ExpatBill » April 25th, 2019, 6:48 am

torata wrote:I'm not sure how much investing you've done so apologies if this is already known.
Very simply...
- Buy ETFs on the LSE, but based in Dublin. If you buy UK based ETFs, then dividend income will be counted as UK (dividend) income.
- Buying on the LSE, the ETF will be priced in GBP, even if underlying asset is priced in dollars (or whatever)
- However, the dividends may come into the broker in GBP or in USD depending on the ETF, so if it's USD, then the broker may charge you an exchange commission.
- You'll carry the currency risk somewhere unless you buy a hedged ETF, in which case you're paying for the privilege.

A good example is the iShares list of global ETFs
...
You can see what's in what currency and hedged or not.

Personally, curency risk is not something that I worry about when buying ETFs.


I know very little, so no problems! ;-)

So, if i understand correctly, the ETFs have a currency and a domicile and a stock market? So I could buy an ETF that is Irish Domiciled, but listed on the London Exchange?
The Domicile affects the tax paid? The Exchange affects the currency?

So, for example, something like this ( iShares MSCI Japan GBP Hedged UCITS ETF (Acc) )
Is listed on the LSE and so denominated in GBP, but domiciled in Ireland but the underlying assets are in Yen. (And is therefore hedged back to GBP monthly so there are no dramatic gains/losses due to currency fluctuations?)

(Note, I'm not particularly looking into this/Japanese markets, just as an example).

Why is currency risk not something you'd worry about, if you don't mind me asking?
From my uninformed view it seems like big unpredictable currency swings could wipe out any profits, and also undermine the theoretical long term growth that makes ETFs attractive? For example, over the last 10 years the pound has lost a lot of its value against the yen/usd etc...
(though in this case I guess that'd work in a GBP investor's favor)

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Re: Degiro best/easiest option? Safety and other questions

#218519

Postby hiriskpaul » April 30th, 2019, 6:34 pm

Only just spotted this. As suggested, other boards might be better placed for your questions.

Regarding DEGIRO, I have found them very good for ETFs and their fees, including FX fees, are highly competitive. I have found some odd behaviour with more obscure/illiquid securities such as preference shares. For example, fill orders not being actioned whilst similar simultaneous fill orders at other brokers did get actioned. Nothing I can really put my finger on, just an impression that they are probably not the optimal platform for anything esoteric. I think they are fairly safe, but impossible to know for sure. They keep their fees low by lending out your securities. Not something that bothers me as the lending is well collateralised, but if you are concerned they do offer accounts that do not lend for slightly higher fees. (Many ETFs also lend out underlying securities!)

For ETFs, don't worry too much about the base or accounting currency. For example, a Japan ETF is likely to have USD as base currency rather than JPY. The base currency makes no difference to the performance. So if you can find a Japan ETF with base currency in JPY, it will give the same return as an ETF with base currency USD, assuming all else (same index, same fees, same tracking error, etc) is equal. You may however find that an ETF has multiple currency listings. Wherever possible try to invest in the listing that has the same currency as your cash. That way you will avoid an FX fee levied by the broker to convert your cash before buying ETF shares. Dividends will be paid in the base currency of the ETF by the way, not the listing currency. DEGIRO give you the option of leaving dividends in the currency or automatically converting to your main account currency, so it is up to you which to choose.

One thing to look out for with ETFs is the "UK reporting status". For UK investors, any ETF that does not have UK reporting status will have capital gains taxed as income. So anything without UK reporting status is usually best avoided unless your particular tax affairs favour it.

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Re: Degiro best/easiest option? Safety and other questions

#248318

Postby feinmann » August 31st, 2019, 10:52 am

I am an Expat investor from the UK based in Hungary and a thus a Hungarian resident, who is currently bearing the weight of a singularly knotty conundrum. Any views and ideas welcome.

I have had a DeGiro broker account since 2017, and have managed to develop a HYP in the interim, my account receiving monies directly from my UK bank account. DeGiro now inform me that my account will be terminated on September 23 due to Hungary-sourced cross-border financial restrictions. DeGiro have advised me that I would though, be able to move my investments onto their Hungarian platform, but incur charges in doing so. The new platform screen interface would be in Hungarian, plus my funds would need to be sourced from a Hungarian bank in Forints. All of this would imply a future marked dilution of the financial benefit derived from my sterling-based HYP.

I have worked hard to establish my HYP, but now, short of moving to another country, it would appear that I will have to sell my complete portfolio.

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Re: Degiro best/easiest option? Safety and other questions

#250755

Postby ExpatBill » September 10th, 2019, 2:35 pm

I finally got around to applying for a Degiro UK account, only to get half way through the process and find you need a "primary address" located in a select group of countries. (Don't remember which ones, but mostly UK or EU).
Anyway, Japan wasn't on the list and according to their support that means I can't open an account. :x

Given that SVS XO seems to have gone Bankrupt in the meantime, does that leave Interactive Brokers as the only known option that accepts non-residents?

I'll have to go back and check their fees etc.. but I seem to remember they have a $10 monthly inactivity fee if your monthly commissions are less than $10.
Given that my investment is likely to be small, and I'm not likely to be generating $10 in comissions very often, I'm wondering if the $10 a month is going to outweigh the returns.
(Back of envelope, probably wrong: Need to invest about $1750 if returns are 7%pa to cover the $120pa fees, not including any other fees?)

Does the non-UK degiro have different policies? Does anyone have any other suggestions for low cost platforms that are open to non-residents?

Ta!

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Re: Degiro best/easiest option? Safety and other questions

#251111

Postby feinmann » September 11th, 2019, 4:27 pm

Cannot answer your non-UK platform question as I am still on the DeGiro UK platform. I am currently sounding out Saxo Bank (Denmark) and eToro to see what online broker services they can offer me. I'll keep you posted.

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Re: Degiro best/easiest option? Safety and other questions

#251241

Postby torata » September 11th, 2019, 11:20 pm

ExpatBill wrote:I finally got around to applying for a Degiro UK account, only to get half way through the process and find you need a "primary address" located in a select group of countries. (Don't remember which ones, but mostly UK or EU).
Anyway, Japan wasn't on the list and according to their support that means I can't open an account. :x

Given that SVS XO seems to have gone Bankrupt in the meantime, does that leave Interactive Brokers as the only known option that accepts non-residents?

...

Does the non-UK degiro have different policies? Does anyone have any other suggestions for low cost platforms that are open to non-residents?
Ta!


I am in a similar position, so would be interested to hear what you finally decide.
In the meantime (this is not something I've followed up on yet), this website
http://www.pimfa.co.uk/managing-your-money/find-a-firm/
may be useful.

torata


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