Wealth Management: Even Cheaper Than Trading Yourself

The lower the fees for your investment, the more return you keep. Since the first online brokers appeared on the market more than 20 years ago, it has been possible to trade yourself for fees that are well below those charged by the large banks. But should you really be managing your own assets simply because of the costs?

Online Trading Fees

Let’s take a look at two internet providers that have performed very well in fee comparisons for many years: Swissquote and Migrosbank.

For small trades, Swissquote is the cheapest provider in Switzerland. Its clients pay a fee of only CHF 9 for mini-trades with a maximum volume of CHF 500. However, these trades that are below CHF 500 are mostly by investors with a very small portfolio that are still looking to diversify. Or day traders who trade options in small amounts. For a CHF 10'000 position in Swiss shares or ETFs, Swissquote’s transaction costs are normally around CHF 50 (1).

Anyone who regularly transacts more than CHF 10'000 per position will find an attractive flat rate in Migrosbank’s online offer, where a trade in Swiss shares or ETFs will cost CHF 40 – starting with the first trade and regardless of volume. That pays off for investors who also hold larger positions in a bigger portfolio.

Whichever bank you choose, all providers only offer part of their services at low prices. Migrosbank’s offer is aimed primarily at clients who want to transact large volumes on a regular basis. Swissquote mainly tries to attract retail investors and day traders with low fees for small transactions. But both are cheaper than the large banks.

By using the online calculator from independent comparison service Moneyland (see link below), you can easily simulate how much you would save in your particular situation by switching accounts.

True Wealth Has No Transaction Costs

However, the question arises of whether the usual fee comparisons actually compare the right things. Because here – entirely rationally and expectedly – apples are compared with apples. For a change, the issue of fees can also be considered completely differently: It’s worth comparing apples and oranges.

Do you really have to trade yourself? Or is portfolio management a cheaper option if it's professionally managed?

With True Wealth’s online wealth management service, the costs you would pay individually if you traded yourself (2) are settled by a flat-rate fee of 0.25-0.5%. This includes custody account fees and the transaction costs per trade.

Fund fees are shown separately at True Wealth because the fees for the ETFs you hold in your portfolio are always determined by the fund provider. As the fund fees are taken directly from the fund assets, they are not shown in your account statement if you decide to trade yourself.

Let’s compare the total custody account and transaction costs from online trading with True Wealth’s flat-rate fee. At True Wealth, we will manage a custody account worth CHF 100'000 for CHF 500 per year. For the same size portfolio, Swissquote will charge custody account fees of CHF 100. So if you only want to spend CHF 500 there, you will still have CHF 400 left for transactions. This is likely to let you trade exactly eight times (in Switzerland, no foreign currencies). Migrosbank charges custody account fees of CHF 230. And you won’t even get seven trades for the remaining CHF 270.

Don’t Forget to Diversify

But you won’t get a well-diversified portfolio with only six to eight trades a year. On average, client portfolios at True Wealth contain between 20 and 30 individual securities, depending on the selected risk profile. It is not possible to build up this sort of diversified portfolio in the first year with only six to eight trades per year. If you carry out 20 individual trades yourself, the cost at Migrosbank would be CHF 1'030 and CHF 1'100 at Swissquote.

In subsequent years, six to eight trades will not be enough to adapt your strategy to another risk profile, or to carry out any rebalancing within your selected strategy (To find out more about the benefits of rebalancing and how we do it, click here.)

Just to rebalance twice a year needs an average of around 40 transactions annually. Doing this yourself would cost you CHF 1'830 at Migrosbank or CHF 2'100 at Swissquote – not to mention the effort required. By contrast, all the necessary trades are included in True Wealth’s flat-rate fee.

Online Wealth Management Is Cheaper Than Online Trading

Digital transformation makes it cheaper. For many years, that was the one big advantage of online brokers. But digital transformation today goes even further. Now, the systematic automation of processes makes even professional wealth management affordable – and for diversified portfolios with ETFs, it is even cheaper than online trading.

So ask yourself this question: Do you really want to spend time trading on the stock market just because it’s cheaper than private banking? Or if professional wealth management is cheaper, wouldn't you rather delegate management of your assets instead?

Why not try True Wealth’s services? Use a risk-free test account to discover the complete range of functions that our online wealth management service provides.

Links

• Overview of fees for online trading with the comparison service Moneyland
• Overview of fees for online wealth management
• Overview of True Wealth's fees

Footnotes

(1) Swissquote’s prices are staggered up to a volume of CHF 125'000; beyond this the transaction fees are CHF 250. Swissquote is cheaper for ETFs if you pre-buy a certain number of ETF trades.

(2) Our management fee includes transaction costs (building the portfolio, adjustment to target weightings, reducing the portfolio); i.e. trading commissions charged to you by our custodian bank are deducted from our management fee in the subsequent fee statements.