Your opinion on my full investment fees?

[CPMB]

Good morning all,

I have just started with my new monthly investing strategy, and I have been amazed (not in the good sense) by the amount of fees I paid along the process. I would very much like to have your opinion as experienced investors in Switzerland, and how maybe I can improve the transfer trail and reduce fees.

1. TRANSFERS

• My money start from Yuh. I sent 1.004 CHF (Yuh has a 4 CHF fee on CHF transfers outside Switzerland) to Wise.
• Only 975 CHF arrived in Wise. The transcript says that "other banks" took 25 CHF fees - I called Yuh for an explanation but they did not seem to be aware of it. Might it be because Wise uses an UK IBAN for CHF transfers?
• Then, I uploaded the 975 CHF to IBKR, with around 2 CHF of fees, making it 973 CHF.

2. INVESTING

• I first bought 3 units of Franklin FTSE India, for a total amount of $144,14, and for which I had to pay $1.91 transaction fees (1,33% !!!).
• Then, I bought 3 units of EUWAX Gold II, for a total amount of 237.39€, and with a fees of 1.25€ (0.53%).
• Finally, I bought 40 units of AXA IM Nasdaq 100, for a total amount of $681,36, with $4.16 fees (0.61%).

In all cases, I am very surprised of how high the fees are, since most brokers are aounrd 0.5%. Am I doing something wrong?

Thank you in advance for your help.

 

[Baptiste Wicht]

Hi CPMB and welcome to the forum

For transfers, it's not worth going through Wise, IB is less expensive for currency conversions. You can send for free to IB and then convert it. This would have cost you less than 2 CHF of fees instead of 34. It very often happen that sending CHF to a non-CH IBAN results in fees. But IB has a CH IBAN.

For investing, IB is outstanding for US ETFs which most Swiss investors are using. But for European ETFs, it is good but mostly on par with other European brokers. You can try to see if using the tiered pricing would lower your fees (it often does for small amounts). but generally, investing something like 144$ is not very efficient.

Do you mind sharing the full names of your ETFs? I think it would be more efficient to switch to US ETFs.

 

[Omainec]

Yo can transfer CHF from Yuh to IBKR whitout any fees directly, same day arrival.
You also can transfer CHF from Yuh to Wise whitout any fees, by the way. They have a swiss IBAN.

 

[CPMB]

Thank you both for your answers!

I thought IBKR had some kind of partnership with Wise for transfers without or with verry little fees, which is reason why I went through it - not even to convert currencies. From your messages, I have learned that IBKR had a CH IBAN and I will now directly transfer from Yuh to IBKR. Do I need to always notify IBKR of a coming transfer or can I directly send money there?

Do you mind sharing the full names of your ETFs? I think it would be more efficient to switch to US ETFs.

Sure, the 3 ETFs are:

• Franklin FTSE India, code FLXI
• EUWAX Gold II, code EWG2LD
• AXA IM Nasdaq 100, code ANAU

Yo can transfer CHF from Yuh to IBKR whitout any fees directly, same day arrival.
You also can transfer CHF from Yuh to Wise whitout any fees, by the way. They have a swiss IBAN.

I have tried a small Yuh to IBKR transfer, it is the day after though. Maybe it would have worked in the morning?
And do you know how to get that swiss IBAN from WISE, in case I need it? For CHF transactions, they gave me a UK one...

 

[Omainec]

CH08008635008770000647
They have a customer service

 

[Omainec]

That IBAN was Wise
The IBKR transfer information you find in IBKR.; btw. you have to transmit an identification number of your IBKR account with the transfer, you find that at the same place (I don't recall where from memory ...)

 

[Baptiste Wicht]

o I need to always notify IBKR of a coming transfer or can I directly send money there?

Yes, you need to notify.

You may want to look for some alternatives for some of your positions, especially for Nasdaq since there are many US ETFs for this index.

 

[CPMB]

You may want to look for some alternatives for some of your positions, especially for Nasdaq since there are many US ETFs for this index.

Thing is, that ETF has a TER below alternatives (0.14 vs around 0.20), so what I lose in transaction fees, I should win in the long run. I wasn't expecting such transactions fees though - I might let go the indian one, especially...

I already use the tiered princing - could the fixed one be more interesting? Or would it make sense maybe to only invest every two months instead of each months, to get bigger amounts?

Thank you again for your help.

 

[Baptiste Wicht]

Thing is, that ETF has a TER below alternatives (0.14 vs around 0.20), so what I lose in transaction fees, I should win in the long run. I wasn't expecting such transactions fees though - I might let go the indian one, especially...

The problem is not the TER, the problem is what you lose to US Dividends.

What Makes U.S. ETFs So Great? - The Poor Swiss

U.S. ETFs are the most efficient ETFs for Swiss investors, find out how to save money and optimize your portfolio!

thepoorswiss.com

 

[CPMB]

The problem is not the TER, the problem is what you lose to US Dividends.

What Makes U.S. ETFs So Great? - The Poor Swiss

U.S. ETFs are the most efficient ETFs for Swiss investors, find out how to save money and optimize your portfolio!

thepoorswiss.com

Thanks for the article, interesting food for thoughts.

Ah, dividends, big topic... In this case, my US-alternative would be QQQ from Invesco, which pays out trimestrial dividends. Of which Switzerland would withhold 35% if I am correct, and that I cannot get back since I am subjected to source taxation.

So I think the Axa IM ETF, based in Ireland, which does not pay out any dividend, is probably more efficient in my case.

I would need to compare the transactions fees though, and have a look at the fixed fees rates.

 

[Baptiste Wicht]

Ah, dividends, big topic... In this case, my US-alternative would be QQQ from Invesco, which pays out trimestrial dividends. Of which Switzerland would withhold 35% if I am correct, and that I cannot get back since I am subjected to source taxation.

No, that's incorrect. If it's a US ETF, with IB, you will not pay 35%. Instead, you will pay 30% to the IRS (or 15% if you fill a W8-BEN). But then, you indeed cannot claim it back since you do not fill a tax return.

So I think the Axa IM ETF, based in Ireland, which does not pay out any dividend, is probably more efficient in my case.

Accumulated dividends are taxed the same way in Switzerland as distributed dividends. At some point (3000 CHF in most cantons), you will need to fill a tax return anyway.

 

[CPMB]

I'm a bit confused.

In my head, in the case of an accumulating ETF, the money is never paid out to the individual investors - and the ETF managers do not know who own their shares. Therefore, I doubt the Swiss governement can withhold any money from an accumulating ETF.

From what I understand from your article on the subject (https://thepoorswiss.com/distributing-vs-accumulating/#:~:text=Taxes in Switzerland,-Now, there is&text=This myth is entirely wrong,to have a virtual dividend.), I would have to declare the accumulating ETF to them, for them to then ask me to pay tax on its "virtual dividends" following their grid. But if I do not declare it (since I am not doing a tax return), nothing can be withhold.

If I may recap then:

• If I buy a NASDAQ ETF based in Ireland, the IRS will withhold 30% of the dividends paid out to the fund (because foreign).
  • If it then pays out dividends to me, Switzerland will withhold 35%. (1)
  • If it doesn't pay out dividends, it's up to me to declare them to pay tax on virtual dividends (2)
• If I buy a NASADAQ ETF based in the US, the fund will get the full dividends.
  • If it pays out dividends, IB will keep 30% of the dividends for the IRS. (3)
  • If not, it's up to me to declare them to Switzerland to pay tax on virtual dividends. (4)

Making options 2 and 4 similar to me.
Correct?

 

[Baptiste Wicht]

In my head, in the case of an accumulating ETF, the money is never paid out to the individual investors - and the ETF managers do not know who own their shares. Therefore, I doubt the Swiss governement can withhold any money from an accumulating ETF.

You are correct that it cannot be withheld, but it can be taxed. And since you are not doing a tax return, it's not taxed for now, exactly like distributed ETFs. But starting from a net worth of 150k or dividends of 3000 CHF per year, varying per canton, you will be forced to do a tax return, in which case, you will base taxed. So, in both cases, dividends are taxed the same way.

Correct?

It's unfortunately more complicated than that. The 35% Swiss withholding only apply to Swiss stocks and Swiss ETFs, not foreign ETFs.

So, for an ETF with US inside (like a NASDAQ ETF):

• The IRS will withhold 15% of the dividends (Ireland has a tax treaty with the US)
• In both cases (1) and (2), you will not pay any further withholding on the 85%
• In both cases, you cannot reclaim this money whether or not you make a tax return

For a US ETF with US stocks inside (like a NASDAQ ETF):

• The IRS will withhold 15% of the dividends (as long as you have filled a W8BEN form)
• In both cases, (3) and (4), you will not pay any further withholding
• If you do a tax return, you can reclaim the 15%, making it more efficietn than (1) and (2)
• If you do fill a tax return, you cannot reclaim the 15%
• As far as I know, there is no accumulating US ETFs, so point (4) is a bit moot.

So, for you (1), (2) and (3) should be the same. When you switch to a tax return, (3) will be best.

 

[CPMB]

Wow, that's very clear now, great explanation!

I understand better why you recommend US ETFs, which makes sense, as long as you indeed fill that W8BEN form, which is pretty complicated from what I have seen (as they require numbers to be asked for, etc), and the instructions file is a bit demotivating - maybe explaning more simply how that is done could be an article idea for you

Anyway, merci Baptiste !!!

 

[Baptiste Wicht]

maybe explaning more simply how that is done could be an article idea for you

I talk about it here:

How To Open An Interactive Brokers Account In 2024? - The Poor Swiss

Find out why I am opening an Interactive Brokers account, my second broker account. Find out the detailed steps on how to do so.

thepoorswiss.com

Do you think I should go more in-depth?

 

[CPMB]

Oh I have taken a look in IBKR, if it is just filling out the info that are asked as part of the registration process (where you declare benefiting from the treaty with Switzerland, etc), it is indeed simple and I had done it already without even knowing about it. Then, all good!

 

[Baptiste Wicht]

Oh I have taken a look in IBKR, if it is just filling out the info that are asked as part of the registration process (where you declare benefiting from the treaty with Switzerland, etc), it is indeed simple and I had done it already without even knowing about it. Then, all good!

Yes, it usually sounds more daunting than it is

 

[Noah294]

Hey! Those fees you're facing are unfortunately quite common, especially with Wise transfers. Using a UK IBAN for CHF often results in extra costs. Maybe try direct transfers to IBKR, skipping Wise altogether? You could also check out other transfer options for comparison!

PS... Also, check different ETFs, some have lower transaction fees.

 

[CPMB]

Will do that, thank you for your answer