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I have talked about several brokers on this blog. But I have not yet answered the question of which one is the best broker in Switzerland!
This article will answer this important question. There are several Swiss brokers, and most Swiss banks have their broker service. But some international brokers are also available in Switzerland.
If you want to invest in the stock market, you will need a broker account. So, before you can invest, you will need to choose a broker account. You need to choose carefully since changing brokers is neither easy nor free. Therefore, it is essential to pick the best broker possible.
By the end of this article, you will know exactly which broker you should use as a Swiss passive investor in ETF!
How to choose a broker?
Choosing a broker is not very difficult, but it is a very important decision.
You are likely to use it for many years. You can always switch to a new broker. But moving your shares to a new broker is not free and not straightforward to do. So, it is better to start with the right decision directly. Ideally, you want to start with the best broker for your needs.
The first thing you need to ensure is that you only trade with a reputable broker. You will entrust your investments with this broker. So you want a broker with a good reputation and excellent security.
Mainly, you need to ensure that the broker will hold your assets separately from the broker’s legal entity. That way, if the broker defaults, you can still reclaim your assets through the secondary entity. This is called asset segregation, and it is something that any proper broker will do.
The second thing you should check is whether the broker gives you access to the exchanges you need. For instance, if you want to trade in Swiss stocks, you will need access to the Swiss Stock Exchange (SWX).
Due to a bad set of laws, it is currently challenging to access Exchange Traded Funds (ETFs) from the U.S. Indeed, European investors cannot currently invest in these funds. And only Interactive Brokers (among the affordable brokers) will offer Swiss investors access to these U.S. ETFs. So, if you want to invest in these funds, your choice is overly limited.
Finally, you need to look at the prices of transactions. This is the main issue with most Swiss brokers. They are terribly expensive. As we will see later, there can be a huge difference in fees between different brokers. Most people do not realize this! When you compare brokers, you will see that the difference is too big to ignore!
Out of these three criteria, the third one is the one that requires the most research. Finding reputable and safe brokers is not very difficult. But finding an affordable broker giving you access to the stock exchanges you need is not always easy. If you do your research properly, you will directly start using the best broker for your needs.
The best brokers in Switzerland
As I said before, there are many options. You can probably trade directly with your bank. But Swiss banks are costly for trading. It would be convenient to trade directly with your bank. Unfortunately, they are too expensive. So, you should not trade with your bank.
There are a few okay options with Swiss online brokers:
These are already much more interesting than trading with your bank. But they are not cheap either.
Finally, there are several international online brokers available for Swiss investors:
These two brokers are the best options available for Switzerland. They are significantly cheaper than all the other options available in Switzerland. They may not be Swiss, but they offer all their services to Swiss investors. This makes them the two best brokers in Switzerland.
To see that it is the case, we will compare the fees of the different brokers. We can also consider the fact that you do not have to pay Swiss Stamp Tax with them.
Comparison of the brokerage fees
We can quickly compare the fees of some of these brokers for some operations.
I cannot make a comparison of all the brokers available because there are too many. So I picked the most popular brokers in Switzerland. I included two bank brokers, two online swiss brokers, and two international brokers. This should give a good set of brokers for comparison. This should definitely help to show what are the best brokers in Switzerland.
Here are the fees for these 6 brokers for a few examples of operations on Swiss and American stock exchanges. I used the share prices of April 16th for the comparison. Here are all the data I have collected:
|Custody Fees||90 CHF / year||0.23% / year
Min 50 CHF
|35 CHF / quarter
|0.025% / quarter
Min 15 CHF
Max 50 CHF
|0 CHF||0 CHF|
|Buy 10 CHSPI shares||25 CHF||40 CHF||20 CHF||9 CHF||2.35 EUR||5 CHF|
|Buy 100 CHSPI shares||50 CHF||40 CHF||23 CHF||9 CHF||5.55 EUR||5 CHF|
|Buy 10 NOVN shares||15 CHF||40 CHF||20 CHF||20 CHF||5.42 CHF||5 CHF|
|Buy 100 NOVN shares||35 CHF||40 CHF||20 CHF||30 CHF||9.23 CHF||5 CHF|
|Buy 10 MSFT shares||35 USD||40 CHF||25 CHF||25 USD||0.54 EUR||0.35 USD|
|Buy 100 MSFT shares||70 USD||40 CHF||25 CHF||80 USD||0.90 EUR||0.36 USD|
Or, if you prefer, here is the data in graphical format:
As we can expect, the Swiss traditional brokers are in a terrible position. Swiss online brokers are slightly better. SwissQuote is not as bad in some cases, except for USD shares. The worst would be Migros since they do not have a maximum on their custody fees, which is a terrible drag once you have a large portfolio.
In most cases, Interactive Brokers is the cheapest broker. It is followed by DEGIRO. So our two online foreign brokers are significantly cheaper than the others. In the worst case, IB is 222 times cheaper than Swissquote!
On average, if you are doing big enough transactions, both DEGIRO and IB will be much cheaper than the other brokers. They are always among the cheapest and are never in the most expensive options. For me, this shows that DEGIRO and IB are the best brokers available in Switzerland.
If you would like to have more brokers included in this comparison, let me know, I can extend the list if many people are interested. I know that some people want to have a Swiss broker. For them, I have an article where I compare the best Swiss brokers.
Swiss Stamp Tax
In Switzerland, there is a tax called the Swiss Stamp Tax (or Swiss Stamp Duty). This is also called the Swiss Securities Transfer Tax. This is a federal tax.
This levies a tax on each transfer of securities when a Swiss securities dealer is involved in. By Swiss securities dealer, the tax means Swiss banks and Swiss brokers.
The amount of the tax depends on the exchange:
- Swiss securities: 0.075% fee
- Foreign securities: 0.15% fee
This tax only applies to Swiss securities dealers, not foreign securities dealers! This means that by choosing a non-Swiss broker, you will save on the Swiss Stamp Tax! Since this tax is levied in both directions (buy and sell), by using a Swiss Broker, you are effectively losing 0.30% of your transactions! Over the years, this can quickly add up to a large amount!
This tax effectively moves people away from Swiss brokers. This law officially makes foreign brokers the best brokers for Switzerland.
For more information, read my article on the Swiss Stamp Tax Duty.
The two best brokers in Switzerland
As we could see from the comparison, the choice is fairly easy. From a fee point of view, only Interactive Brokers and DEGIRO are good choices. All the others are too expensive. Interactive Brokers is the cheapest of the available brokers.
For me, Interactive Brokers is definitely the best broker available in Switzerland. Even though DEGIRO is also cheap, it cannot fully compare with IB.
There is one big difference currently between these two brokers. Only Interactive Brokers currently offers access to U.S. ETF. So, if you want to invest in U.S. ETF, you will need to use IB. This is only the case for ETFs. Both brokers are giving access to all other U.S. securities.
Aside from these two differences, they are both excellent brokers. DEGIRO is a bit more expensive for currency exchange. This makes it a bit more expensive for a Swiss investor. On the other hand, DEGIRO is cheaper for European securities. So it makes DEGIRO interesting for European investors. And European investors do not have access to U.S. ETFs anyway, so they have more choices of brokers.
IB is a bit cheaper and offers excellent foreign exchange trading. And it offers tons of features and analysis tools. This comes at the price of complexity. At first sight, Interactive Brokers is quite intimidating. But it has become better and better over the years. As a simple investor, you will only need a small portion of all the features of IB.
Interactive Brokers – The best broker
As mentioned before, Interactive Brokers is the only one of the two best brokers to give you access to U.S. ETFs. So, if you plan to invest in them, IB should be your choice. It is my favorite broker, the one I use and the one I recommend!
Interactive Brokers is a broker from the United States. But if you are in Europe, you will use its United Kingdom subsidiary. But this remains the same broker. It is a very well-established broker, funded in 1978. It has many customers all over the world.
Although it is a low-cost broker, it offers many features. They offer access to almost all instruments available in many stock exchanges. You can trade in stocks, contracts, options, and other derivatives. And they have a great platform for FOREX trading. For passive investors, you will have many more features than you need.
The biggest disadvantage of IB is that it is sometimes a bit obscure to use. IB has many different user interfaces, and at the beginning, it is not very clear which one should be used.
Other than that, IB is an excellent broker!
If you are interested, I have a guide on opening an account at Interactive Brokers and a guide on trading ETFs with Interactive Brokers.
DEGIRO – The simplest broker
DEGIRO is the broker I have started with. It is a good and cheap broker. It is relatively simple to use. However, they are much less professional than IB.
DEGIRO is a broker from The Netherlands that is available to most countries in Europe. They started in 2008 already, and they have been growing really fast since that time. Now, they are one of the major brokers in Europe.
One disadvantage of DEGIRO is that it does not offer proper FOREX trading. You cannot hold different currencies in your account. This means that your cash is converted automatically when you make a trade in another currency.
And you will have to pay fees for these transactions. This makes it a little more expensive than IB when your base currency is not the currency of your main ETF.
On some transactions, it can also be a bit more expensive than Interactive Brokers. But unless you are doing substantial transactions, this should not be a big difference.
A big limitation is that DEGIRO does not let Swiss investors invest in U.S. ETFs. For starting investors and people that do not plan to invest a large amount of money, this is probably fine. But with a large portfolio, you can save a significant amount of money investing in these U.S. ETFs.
Finally, you need to be aware that, by default, DEGIRO will lend your shares to other investors. You can avoid this by opting for the Custody account, but you will pay some significant fees on dividends.
If you are interested, I have a tutorial on how to open an account with DEGIRO.
Interactive Brokers and DEGIRO are the best brokers available in Switzerland. They are both reputable and safe brokers. And they are the cheapest brokers available in Switzerland. Moreover, you will save on the Swiss Stamp Duty that you only have to pay with Swiss brokers.
Swiss brokers are working fine, and there is nothing fundamentally wrong with them. But they are much more expensive than online foreign brokers. And when you add the Swiss Stamp Duty on top of that, the difference is quite large. When you invest, you do not want to waste your returns on fees. So, you need to minimize the fees. And for that, you need to choose the best brokers.
I strongly believe that Interactive Brokers is the best broker for Swiss investors in all cases. There are only very few cases where DEGIRO is slightly cheaper than Interactive Brokers. And IB is a much more complete solution for investors. It also has a better reputation. Finally, given that they offer access to U.S. ETFs, IB can help you save a lot of money. If you want, here is a guide on how to get started with Interactive Brokers.
Now, some people are uncomfortable having their shares in a foreign broker. For these people, I have found the best Swiss brokers.
If you want even more detail about the best brokers in Switzerland, read the full comparison of Interactive Brokers and DEGIRO! You may be surprised by the results!
What about you? What is the best broker for you?