If Something Sounds Too Good To Be True…

It probably is too good to be true!

So, yesterday I stumbled across this ridiculously cheap Dutch broker (De Giro) and I immediately opened an account in order to check things out.

I am so going to close my account again.

Why? Well, reading their general terms and conditions made me rather furious. You have to sign an agreement which states that they are allowed to lend your stocks to third parties. Okay, there are other brokers who also do this. However, with this particular broker ALL RISKS are the investor’s responsibility!!! There is no insurance, your cash money isn’t safe and if the third party who borrowed your stocks won’t pay up it’s your loss!

NO FREAKIN’ WAY I am investing with these guys!

I am very content with my beloved Meesman ❤ and BinckBank is okay for our larger Vanguard transactions in euros. I’m thinking about Lynx for our dollar investments with Vanguard. These three are so much safer for buy and hold investors like ourselves.

A thorough research into finding your ideal broker is well worth your time as this case demonstrates again.

Love,

Mrs EconoWiser

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7 thoughts on “If Something Sounds Too Good To Be True…

  1. Hank

    Hi, as Degiro now seems to offer “free transactions” for ETF’s , i asked them to give a better explanation, see below. What do you think?

    Degiro reply:
    =====================================================
    Dit is niet correct. Uw aandelen kunnen inderdaad uitgeleend worden, echter wordt hier ten alle tijden minimaal 104% margin voor verreist, wat fysiek bij ons op rekening aanwezig is, zodat wij de positie direct kunnen sluiten. Indien hierbij een tekort ontstaat wordt dat verhaald op de lener, kan de lener hier niet aan voldoen dan staat DEGIRO BV met haar hele vermogen garant voor het tekort. In een uiterst geval kan het zijn dat een positie dusdanig uit de hand loopt dat ook DEGIRO hier niet meer garant voor kan staan, in dat geval wordt het verlies naar rato omgeslagen over onze klanten. Dit is echter een worst case scenario. Ik wil u erop wijzen dat pensioenfondsen vaak tot 30% van de aandelen uitlenen en eventuele verliezen daarop zelf opvangen, zoals ook DEGIRO dat doet. Daarnaast werkt het uitlenen bij DEGIRO niet anders dan bij andere brokers.

    Cash geld wordt aangehouden door ons bewaarbedrijf in een cashfund dat uw cashgeld belegt in AA obligaties, veelal Nederlandse Staatsobligaties. Dit wordt gedaan omdat uw cashgeld op een centrale rekening staat bij de ABN AMRO, wanneer ABN AMRO failliet zou gaan zou het geld in de boedel van ABN AMRO vallen, maar wanneer dit belegt is in obligaties valt dit niet onder de boedel en staat uw geld dus veilig in geval van een faillissement van zowel ABN AMRO als DEGIRO BV. U kunt dit hier nalezen in onze voorwaarden.
    =========================================================

    Reply
  2. a Mustachian

    I just learned from Erica Verdegaal (http://www.ericaverdegaal.nl/publications/index/930) that DEGIRO now has a ‘custody account’ option, which means they do not lend out your securities. I am yet to properly investigate this option, but combined with DEGIRO’s transaction fees (i.e. none), it sounds very enticing.

    Looking forward to what you can dig up about this!

    Reply
      1. a Mustachian

        On closer inspection there is still at least one drawback: DEGIRO charges you for processing dividend payments to the tune of €1 + 3% (10% max). That doesn’t sound nearly as good as ‘No transaction fees!’.

        I think I recall reading somewhere that dividends and capital gains each account for about half of your shares’ total yield. If that is indeed the case, a 3% fee on dividends equates to a 1.5% reduction in your total yield.

  3. Arjen

    Hello fellow Mustachians,

    I am very happy that I found this blog! As a Dutchie myselve, This brings the MMM experience closer to home! Though, I have to respectfully disagree with your opinions on DeGiro. I have been using their platform with a CUSTODY account for quite some time now, and I must say I am very pleased with the experience:

    -No transaction costs for all USD-based (and most EUR-based) Vanguard ETF’s.
    -Quarterly Vanguard dividend payments.
    -No charges for dividend processing (so far 🙂 ).
    -No paper forms to fill in.
    -Simple online W-8 BEN form.
    -All on a very simple platform.

    Now, I think the reason why DeGiro is so cheap is because they do not provide many “extras” (we wouldn’t want to pay for market news and other fancy options as passive index investors now, would we?).

    And if DeGiro would charge dividend processing someday, it would only be 3% of an average 2% dividend yield, which would be a mere 0.0006% (!) of your capital/year. Added to the average expense ratio for Vanguard ETFs, your costs would only be 0.1006%. Not so bad, right?

    All in all, DeGiro would be so much cheaper than Binckbank or any other broker. In America, many brokers already offer transaction costs for ETFs for free. I think DeGiro is simply moving the trend to Europe.

    On to FI!

    -Arjen

    Reply
    1. S.

      Hi Arjen, good to hear your recent experiences with DeGiro. I am in the middle of this whole process of finding out which broker and ETF/fund suits me best and it’s quite an adventure so far 😉
      Econowiser, can you maybe give a little insight on your experiences a year after?

      Reply

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