Guide to European Brokers: Pros and Cons

Sep 4, 2024

Update on European Brokers by Angelo

Introduction

  • Angelo discusses an overdue update on European brokers.
  • Covers 14 brokers, more than the previous comparison.
  • Aims to provide understanding of options available for European investors.
  • Mentions local options for Austria and Germany due to complex tax regulations.
  • Shares personal investing background: over 6 years, investing in passive ETFs.

Broker Selection Criteria

Angelo outlines the key factors he looks for in a broker:

  1. Regulatory Oversight
    • Preferably from a financial regulator in Central Europe.
  2. Currency Transactions
    • Must allow buying shares in euros without conversion fees.
  3. Fee Structure
    • No account fees, inactivity fees, or deposit/withdrawal fees.
  4. Transferability
    • Ability to transfer stocks and ETFs to another broker without selling them.
  5. Risk Management
    • Preference for brokers that do not lend out shares.

Recommended Brokers

1. Interactive Brokers

  • Longest history (46 years) with strong security and financial stability.
  • No account fees, shares are not lent out unless activated manually.
  • Direct access to numerous stock markets and low trading fees.
  • Offers tiered pricing model for orders.
  • Complexity may overwhelm new users; mobile app has improved.

2. Trade Republic

  • Based in Germany, available in most European countries.
  • No account fees, shares not lent out, only 1€ fee per trade.
  • Offers 2% interest on uninvested euro deposits, paid monthly.
  • Critiques: Limited to one exchange (Lang & Schwarz) and missing web features.

3. Scalable Capital

  • Similar offerings to Trade Republic, available in several countries.
  • Three broker models: Free, Prime, and Prime Plus with varying fees and benefits.
  • Allows commission-free ETFs from select providers with minimum investments.
  • Critiques: Limited exchange selection and slower dividend processing.

4. DeGiro

  • Available in 17 countries with low dealing fees and no account fees.
  • Recent fee increases and 2.50€ exchange connectivity fee.
  • Share lending policy is mandatory unless using a custody account; counterparty risk involved.

5. Saxo Bank

  • Well-regulated but charges custody fees and other high fees.
  • Not recommended for larger investments due to costs.

Additional Options for Austria and Germany

  • Flatex: No holding fees, but higher direct purchase fees.
  • Smartbroker: No trading fees over 500€, but has a fee for recurring plans.
  • Trade Republic and Scalable Capital: Competitive offerings for German residents.

Short-term Speculative Brokers

Angelo categorizes brokers that are more suited for short-term trading:

1. Trading 212

  • No account or order fees, features investment pies.
  • Critiques: Locked-in shares, no opt-out of share lending policy.

2. Lightyear

  • New broker with mixed reviews; no share transfers allowed.
  • Raises concerns about independence due to pre-approval policy for reviews.

3. Freedom24

  • Offers IPO investments and US-based ETFs.
  • Charges for share transfers and withdrawals; not ideal as a primary broker.

4. eToro

  • Commission-free trading but primarily offers CFDs.
  • High currency conversion fees, withdrawal fees, and inactivity fees.

5. XTB

  • Similar to eToro with physical stocks/ETFs available.
  • Focus on risky CFD products; allows transfer to other brokers without lock-in.

Conclusion

  • Overview of broker options for European investors with pros and cons discussed.
  • Encourages comments on broker categorizations or missed brokers.
  • Promotion of links for brokers mentioned and a playlist on investing in ETFs.
  • Thanks viewers for watching and encourages subscriptions.