Diversifying execution only brokers in the 21st Century

LoveTrees

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Time keeps running... With the age of internet there has been a proliferation of on-line execution only brokers as well... Nevertheless - because I'm getting older and learned that the 2008-9 financial crisis was about diversifying and trusting everyone and no-one - I prefer to invest an x amount almost every 2 months into the stock exchange because I have a separate safety net. Since I started with execution only brokers in 2013 I opened in different times brokers accounts with Interactive Investor, Degiro, Interactive Brokers and IG.com.

I always refer to the FIFO rule if I'm selling a particular share that is appearing on more than 1 broker of course always in respect of taxation rules (B&B rules as well, etc). I'm a long term investor and I like the fact that my 4 brokers represent different rules for investing I gave myself over time: one shows typical blue chips shares, another one riskier based on Motley Fool's advisor, another one a bit of a mix, etc. I then see which one is winning every few months. Chapters 8 and 20 of the "Intelligent Investor"-book are my compass.

I am now looking for a 5th broker. I cannot bear (yet?) trading212 sorry: It's an inner feeling I have that I cannot explain sorry... I have been looking at Saxo Markets and looks ok. Any other suggestion for an execution only broker please? Maybe if someone reads this in 20 years from now I will look so conservative or maybe actually my position on diversifying after the lessons from 2008-9 will look good. Only time will tell...

Any suggestion on another execution only broker that you like to deal with please?

My favorites so far:
1) Degiro
2) IB
3) IG.com
4) II
 
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Admittedly I haven't made my first investment yet so I have no recommendations to offer you, just doing a lot research and due diligence myself before I pull my trigger.

Any thoughts or research on eToro?

Trading 212 is my first choice actually. Assets are protected up to £85k by the British government backed FSCS and shares bought through them are held in custody at Interactive Brokers. .

Anything negative about them that I should know about?

I've registered for Degiro anyway though (assets protected only up the EU minimum €20k?) but I've been stuck on literally the same number in the queue for 7 or 8 days now. Not sure if I will opt for Basic or Custody.

https://freetrade.io/ are supposedly coming to the Irish market soon, might be worth keeping an eye out for them.
 
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I just don't like the concept of 'fraction of shares' in trading212 sorry. But I am 'old generation' so I might be just worrying too much :)

Thank you for your advice
 
Sorry, I think this is nuts. You want low cost broker accounts but you are scared about the security of your money with them. But you won't pay for the added security that the more expensive accounts charge. Maybe they charge more because they have higher costs in ensuring that your money is secure?
 
“I want all of the protection that high standards of risk and compliance provide but I don’t want to pay for it”

Those firms (e.g. Davy etc) fund the Central Bank’s supervisory activities.
 
Too many of the low cost UK brokers have gone belly up. There are many problems in clients trying to reclaim their shares and cash. If you are investing a large sum, it is probably worth paying the little extra for the comfort that they will survive! The costs of compliance and regulation are quite high and someone must pay.
 
Too many of the low cost UK brokers have gone belly up. There are many problems in clients trying to reclaim their shares and cash. If you are investing a large sum, it is probably worth paying the little extra for the comfort that they will survive! The costs of compliance and regulation are quite high and someone must pay.
Good point... :)
 
Stumbled across this old topic when searching for something else:

With Interactive Brokers in the market in Ireland now.......and based on both their equity capital base which is far far in excess of regulatory capital requirements...the word fortress balance sheet is over-used but IBKR fits that bill...their unparalleled global platform......their best in class interest rates on large cash balances....low fees, quality execution......I'm not too sure why you'd mess around with anybody else.

IBKR as a company are in the JPMorgan, Berkshire Hathaway & Charles Schwab league.......if you find yourself concerned with their imminent collapse & the collateral damage to the investments they custody for you......I can almost guarantee that you will have higher priorities at that time....like access to food, petrol & trying to keep your family safe.

Which is to stay - I worry about lots of things - but I never worry about my investments held by IBKR.
 
IBKR as a company are in the JPMorgan, Berkshire Hathaway & Charles Schwab league.......if you find yourself concerned with their imminent collapse & the collateral damage to the investments they custody for you......I can almost guarantee that you will have higher priorities at that time....like access to food, petrol & trying to keep your family safe.
The other reason I have multiple online broker accounts is to spread the risk in-case one of the accounts is compromised and the funds withdrawn, particularly if it’s my fault and the funds are not guaranteed. For something you log into once or twice a year and holds your life savings, I don’t think having 2-3 is particularly onerous for the extra peace of mind.
 
How so?
Market caps for example:
  • IBKR $40Bn
  • JP Morgan $419Bn
  • Berkshire Hathaway $796Bn
  • Charles Schwab $109Bn

Market cap is not the right metric when one is concerned with the financial strength of a counterparty.........one should be chiefly concerned with the risk controls of the company your dealing with as a proxy for how likely they are to (a) get into trouble in the first place and then secondly if that company were to get into trouble (b) what is the strength of their balance sheet to absorb unexpected/adverse capital shocks.

When it comes to above IBKR wins on both fronts IMO (with exception of JPMorgan's brokerage biz):

(1) Risk controls - IBKR is simply ruthless with its margin lending accounts.......IBKR does not give you a courtesy phone call....the famous margin calls everyone hears about....nope IBKR begins to automatically liquidate positions in your account.....its margin lending business is very unlikely to ever get it in trouble.....notably versus Schwab....IBKR does not play duration/interest rate risk games with clients funds or its balance sheet to try to eek out additional income....funds are held in 3month tbills & demand deposit accounts at partner banks.....Schwab has recently got itself upside down by taking inflation/duration rate risk with client deposits
(2) Balance sheet - tangible equity underpinning the business relative to its assets/liabilities.....which is to say I could run a very large brokerage firm and continually ensure that I only maintain the regulatory minimum capital base say like Robinhood did in the US...which during the GME debacle made them functionally insolvent until a midnight captial raise.

IBKR has consistently and always maintained excess capital on its balance sheet which equals resilience. The founder Petterfy has a Warren Buffet mindset which is to say that no company should ever be reliant on the kindness of strangers.......if you dont beleive me....go look at the constant chattering by Wall St. analysts that IBKR has excessive amount of capital for its size that should returned to shareholders etc etc.

If you take the risk controls and business model of IBKR and twin it with regulatory capital it has that far exceeds any peers....what your looking at IMO is a Noah's ARK type brokerage business where I never lose a moments sleep over its ability to deliver my assets back to me whenever I want......I'd put it up there with JPM & UBS/Credit Suisses brokerage offering.......seen as IBKR is the only one available to retail Ireland......it is no brainer IMO....the fact its amongst the lowest transaction cost, highest paying on cash deposit broker in the market makes it all the more obvious choice......in fact I'd encourage Davy & Goodbody over time to migrate their backend trading to IBKR.......and just become introducing brokers themselves their own offering would be enhanced by it.
 
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