Commissions ‘n Stuff

The amount of investment funds offered in The Netherlands has sky rocketed to 1624 in total. Wow! How on earth can one choose the right fund from all of those?

Easy, since you have a good pair of brains you read a bit about index investing and you decide to go for an execution only broker. This means that you won’t get any “advice” and will have to do things on your own. Well, that “advice” will be rubbish anyway and it comes at a huge price tag. It could cost 1%-2% annually and will only make the adviser rich, not you.

Then it’s a matter of finding an investment fund which offers great diversification, the lowest TERs and transaction fees possible. You want to check out other fees and you want to know under which custodian your stocks will be kept. Tahdah, it’s super duper easy.

In The Netherlands we have a commission prohibition on most financial services now. It wasn’t until recently your financial adviser would “advise” you on your “best” options to invest in. Not surprisingly, most advisers told their clients to invest in the funds which would give them the most commission. The clients were never told how much their financial adviser made on these sales and transactions. Due to new laws, this has become more transparent. The clients now have to pay for this “great advice” separately. All of a sudden people wake up and smell the coffee. Index investing has become more and more popular in The Netherlands these last couple of months. Unfortunately, more and more new “index funds” are being designed. These funds claim to be index funds where in reality they’re not the kind of index funds we’re interested in. They’re actively managed (and thus more expensive) and they might not track the index of your choice completely. Some are also not diversified enough (like investing in the top 50 companies in your country…).

I’ll just stick to what I know.

How about you? What are laws like in your country concerning commission?

Love,

Mrs EconoWiser

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2 thoughts on “Commissions ‘n Stuff

  1. Frenchie

    Hi,
    Here in France i have been using ING Direct, which I think is a Dutch bank. I haven’t had tim to check the others, and I don’t know how they deal with the “tax leakage” (i think that what you call it. The reasons I am with them Since reading MMM and Jlcollinsh my mind is set. It is Vanguard and nothing else. ETF since i am in France. I plan to invest a couple of time a year big chunks. Ing’s fee for keeping you stock is zéro, for the account is zero also, and opening/transfering is also free. the buying cost can be high, but they offer promotion now and then, (these days, no fees unti lJune 2014 for example. I ve bought VTI so far. I am just starting on my 10 year journey towards FI. Love your blog

    Reply

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