Post New

I am thinking on moving to Portugal or New Zealand. Unfortunately my current broker, Schwab, lists NZ as an "impermissible jurisdiction" and would have to close my account if I'd move there.

So I am looking for alternatives. I might not find one as it might be prohibited in general by US laws (probably because in NZ there is no inheritance tax and therefore as far as I know no according provisions in the double tax agreement).

But of course I want to try. So I just had a look at Interactive Brokers as many/most here using it, but at first glance I think that's not suitable for me: I'd first ask them whether NZ residents can be their clients, but neither on the main page nor on the main menu or the links at the bottom I could find a "contact" link, only info/links about their advantages re trading.

I don't need a super-automated discount broker, I need a broker with real humans I can easily contact and who will reply quickly (for example to that question about NZ residents as clients), as I am used to from Schwab since many years. Recommendations are very welcome, especially if someone already knows about brokers who take NZ residents as clients.

I just had a look at Interactive Brokers as many/most here using it, but at first glance I think that's not suitable for me: I'd first ask them whether NZ residents can be their clients, but neither on the main page nor on the main menu or the links at the bottom I could find a "contact" link, only info/links about their advantages re trading.

I don't need a super-automated discount broker, I need a broker with real humans I can easily contact and who will reply quickly (for example to that question about NZ residents as clients), as I am used to from Schwab since many years.


In what countries can you NOT have an account with Interactive Brokers? New Zealand certainly is in the list of countries where IBKR offers accounts: https://www.interactivebrokers.com/en/accounts/ope...

Interactive Brokers is indeed a 'super-automated discount broker', but I have not usually had much trouble getting in touch with someone, by phone or by chat, on the few occasions where I needed to. The big advantages of IBKR, as far as I am concerned, are not the fact that they provide cheap trades (which they do), but that they save you money on other aspects of your investing activity:
-forex with low slippage - for instance, if you ever convert Euros to USD or get USD dividends in a European or Canadian account, you don't get the outrageous foreign exchange rates (often as much as 1% off the true exchange rate) as with most brokers
-low interest rates charged on loans, if you have any margin at all, typically LIBOR +1% or so, often several percentage points better than the competing brokers I have available to me in Canada
-high interest rates (typically something like LIBOR minus 0.5%) on positive balances beyond a benchmark of about $10,000, as opposed are not zero or close to zero interest with many brokers
-opportunity to purchase securities in not just 1-2 countries, like many brokers, but rather in dozens of countries
-accounts with stocks and cash in multiple currencies - no need to trade forex back and forth every time you buy or sell something
-rebate of half of borrow fees on shares lent out for short sale
-cheap trades (typically about $1 a trade)*

The last advantage was never the most important one, and it is particularly unimportant nowadays, when much of the competition offers the appearance of free trades. In fact, they are often making it up, and way more, by ripping you off in some other way, like providing you with a suboptimal price (payment for order flow being the big one, where they sell their clients’ orders to market makers), but also with suboptimal interest rates and suboptimal forex exchange rates. IB's philosophy is to pass along real costs to clients, plus a small profit margin, on things like share transactions, market data, loans, etc.), instead of loss-leading zero charge on share transactions but with hidden costs that often end up costing you an order of magnitude more.

I am very fond of this 'cost-plus' model, both as a client and as an investor, since I think it makes for good long-term relationships with clients. I still kick myself for not buying Costco 20 years ago (because it cost 30x earnings; the shares are up 20x since then), and I like this feature in other investments that have a similar philosophy. I'm thinking of Carmax, in car dealerships, where they basically target a $2000 margin which covers all their costs and a small profit, dand don't try to take advantage of you in a million other small ways.) I would be very interested in hearing suggestions about other examples of this kind of business strategy...


Regards DTB (full disclosure - IBKR is my third biggest holding, at 7%)

*In many countries, to compete with zero-commission brokers, IBKR also (somewhat reluctantly, I think) offers something they call IB Lite, with zero commissions but with other charges more typical of the industry. However, they apparently don't offer that option in NZ.

More info about IB from a NZ perspective: https://www.moneyhub.co.nz/interactive-brokers-rev....

I can't speak to how independent this Money Hub operation is. They mention other alternatives available in New Zealand: Tiger Brokers (NZ), Hatch, Stake or Sharesies.

dtb

So I just had a look at Interactive Brokers as many/most here using it, but at first glance I think that's not suitable for me: I'd first ask them whether NZ residents can be their clients, but neither on the main page nor on the main menu or the links at the bottom I could find a "contact" link, only info/links about their advantages re trading.


I googled "interactive brokers countries supported new zealand", and the answer is yes.
https://www.interactivebrokers.com/en/accounts/ope...

They are not hand holders. If that's what you want, look elsewhere. Most stuff is on line and automated.
But it's not exactly bad: their telephone support is generally gruff but extremely competent and knowledgeable, and their support tickets are generally answered very seriously.
I wouldn't give them up for the world. e.g., I do FX from time to time, and they plug you into the forex market directly. Current bid/ask on EURUSD is 1.08565 / 1.08570.
Not exactly the 3% spread you see at some other brokers!
I did a whole what of US equity trades today. Commissions were 0.00340% of the aggregate trade value.

The biggest downside:
Do not EVER get on the wrong side of their margin rules. They will [insert politically incorrect colourful metaphor] you.
The simple solution is not to use their margin, then everything is fine.

Jim

DTB, What you say about currency conversion at IBKR is very useful as last year when transferring money from Germany to NZ the German "comdirect" bank's rate EUR->NZD was an outrageous good 2% worse than the official EZB rate (banking Ombudsman just discarded my complaint) --- same as 3 years ago when the conversion took place at NZ's ANZ bank which also overcharged 2% (but immediately caved in and corrected that after complaining at the ombudsman).

So in the future when transferring money between Germany and NZ I will only use Transfer Wise --- and it's good to know that with IBKR that won't be needed with my US account.

But most important of course is the knowledge to be able to have another US broker should I indeed move to NZ. I think I open an account now, as I already was thinking of splitting for safety reasons my Schwab account between two brokers.

Problem solved (though I now really wonder why NZ for Schwab is a "impermissible country").

DTB, very helpful. Thanks a lot!

I am having the same issue with moving to France, so far only Fidelity who I am currently with or IBKR who I need to research will keep/take me. Fido will not let me buy and sell, no ETFs or managed/mutual funds, I may only "spend down" ie sell... its a real issue for americans abroad. Banks are closing their accounts too, and maintaining a US phone mumber for verification codes is well nigh impossible.

suggest you look on FB for specialiazed groups for info. I use strictly legal and strictly fiscal group for info and contacts. They specialize in US/UK moving to france and the info is high quality and tightly controlled. you will also find NZ expats on there who may have useful contacts or an NZ specialized group.

good luck !

If you have lots of cash in the brokage account, it would earn less interest in Interactive Brokers than in Fidelity or others. The first $10,000 in IB earns no interest, the rest earns interest rate 4.830%, less than 5.+% in Fidelity.

https://www.interactivebrokers.com/en/accounts/fee...

maintaining a US phone mumber for verification codes is well nigh impossible.

That one is easy.
Get a VOIP account. I have used voip.ms for years. There are others also. Pick any desired city & state for your account, they will give you a local phone number for that location.

https://investor.vanguard.com/investment-products/...

maintaining a US phone mumber for verification codes is well nigh impossible.

You don't need one, as I know now after trying since 2h to open an account at IB.

Situation: I have German phone number. I am currently in New Zealand. The first steps of creating the account did work, so it does exist. I can log in with username+password and the verification code is sent to my German phone no. (while I am here in NZ; works; no problem).

The "trying since 2h" is because at the probably very last step of setting up the account (agreeing with lots of disclosure docs and signing) after "continue" I get always thrown out with "...server error or inactivity".

Logging in again (verification code again sent to my German phone, no problem), trying with a different browser, different device - same error at the same step.

Calling them, being as expected asked by both I talked with: "What Browser?". My reply: "First with my tablet, first with Firefox, then with Chrome. Then with my Win10 laptop, first with Edge, then with Firefox --- and, yes, always with cookies enabled, any add-on deactivated, scripts enabled...". That makes them go quiet, because their standard advice of course would be "Try another browser...".

I am close to give up, having lunch now to mentally regenerate - before trying again.

Back to your US phone no. issue: I can assure you that's not needed as in said process for those dozen of logins I received the same number of verification codes from IB on my German phone.

That one is easy.
Get a VOIP account.

US banks won't send texts over VOIP (like Google Voice) for security reasons. I had to give up my Chase account partly for this reason after recently moving overseas. There are some cheap cell phone plans like Mint that can receive bank 2F texts however.

US banks won't send texts over VOIP (like Google Voice) for security reasons.

I have mixed results but the majority of the couple of dozen financial institutions I've had accounts with in recent years will SMS to GVoice. Really no way to know without trying. Also of course eventually Google will drop GVoice - it's surprising they haven't already, hard to see what the revenue stream or growth model is.

Just did my first trade with IB, Markel, as always with a limit even for liquid stocks, just to be on the safe side. As always I did set the limit a little higher than the asking price to save the hassle of having to change the order when the price goes up a tiny little in the few sec I need: Limit $1502 vs. $1501 (and a few cents) current asking price.

With Schwab I always get execution below my limit, with Schwab then telling me proudly about the "price improvement". Not so with IB. Executed at exactly my $1502 limit. Is that normal with them, so that one has to be more restrictive with the limit, even with liquid stocks?

I routinely get inside the spread at IBKR, even if I put the Ask in as my limit. But your $1502 vs $1501 is less than 0.1%, and for a stock that might not have much volume, I can certainly see the market-maker not want to fill orders inside that B/A spread.

Tails

DTB, Jim, thank you!

I hate IBKR's options chain screen and will continue to trade them with Schwab. But regarding Currency Conversion and even transfer: Wow!

For a test I converted some USD in EUR. That was done instantly and with just a few clicks. And the rate: Unbeatable!

But that's not all: The test continued because I wired the resulting EUR (had to wait 2 days though before they were accessible) to my German EUR account. Normally that's a real hassle, requiring to not only enter your bank account but also lots of details about the Intermediary bank. And God beware if you do that after a glass of wine and make a mistake, as a wire can't be undone.

But with my IBKR account (surprisingly for me) being held in Ireland it was just a simple standard European SEPA transaction, entered in a few sec. Unbeatable again (Assuming the Euros will indeed arrive tomorrow :) !

For a test I converted some USD in EUR. That was done instantly and with just a few clicks. And the rate: Unbeatable!


Yes, it's quick, and the fee is small, and as you say, the exchange rates they offer are excellent.

I recently had to convert some USD to CAD in my mother's account, about $200,000, and I had to do it with a standard broker (TD Direct Investing), and they had a very large spread on the USD:CAD, I just checked to see if they still offer the same outrageously poor exchange rates, and the answer is yes. They currently quote 1.3496 if I'm converting USD to CAD, but 1.3622 if I'm converting CAD to USD. In other words, if I'm buying USD, it will cost me C$1.3622, but if I'm selling they'll give me C$1.3496. Sounds like a small difference, but applied to $200,000, it means a round trip would cost me 200,000*(1.3622-1.3496)=$2520, or half that, $1260, for a simple one-way conversion. For a smaller amount, $10,000, the absolute loss will be lesser, but the spread is even higher (1.3754 to buy and 1.3370 to sell, almost a 4 point spread!), so a $10,000 conversion will still cost me $192, not that I'll ever see that number on an account statement. Like credit card issuers, they make a lot of money that way, with most of their clients not even aware of how they are getting ripped off.

By comparison, with IB, the spread they offer me is 1.35488 (ask) and 1.35485 (bid), no matter what the amount I'm converting is. If I just accept the bid, I pay 1.35488, and if I do the round trip, I may only get 1.35485, so I will end up losing 200,000*(1.35488-1.35485)=$6.00 on the two trades, plus their transaction fee, US$2. So to convert US$200,000 to CAD, I will lose C$1260 with TD, or about $5.50 with IB. To convert US$10,000 to CAD, I will lose $192 with TD and about $3 with IB.

You don't need to do this kind of transaction very often to make it worthwhile going through the hassle of setting up an IB account! And that's without counting the fact that interest rates charged on margin debt are low, interest paid on cash is high compared to most brokers, the don't sell order flow so they probably get you a better price on buys and sells, their commissions are low, you get access to many more foreign stock exchanges than most brokers, etc.

I recently had to convert some USD to CAD in my mother's account, about $200,000, and I had to do it with a standard broker (TD Direct Investing), and they had a very large spread on the USD:CAD, I just checked to see if they still offer the same outrageously poor exchange rates, and the answer is yes.



By the way, if anyone else is ever in this situation, there is an ingenious way to avoid this ripoff, called Norbert's Gambit, which you can google. But it basically involves moving the shares of anything that is traded in both US and Canadian exchanges from a Canadian to a US-denominated accounted (in one direction or the other), which most brokers will do for free. So for instance if you are going from USD to CAD, you buy a stock of an ETF (DLR is a sensible choice) in USD, call them up and get them to transfer to the CAD-denominated account, then sell it, and you have avoided forex slippage, while only paying for two transactions (the buy and the sell). It takes a few days (has to settle before you can sell it), but no one should pay $1000 to do a currency conversion unless it's an emergency.

Some day, maybe the big Canadian brokers will close this loophole, but the strategy has been used for more than 20 years, and I guess the fact that they don't bother closing it means that most Canadian clients are either indifferent to losing $1000 here and there or, more likely, not aware that this is happening.

dtb

DTB

Why did you not use the gambit for your mother's transaction? And, if I may ask, have you ever done this gambit with td direct?
I have all my assets(BRK) with td direct and living in Canada I have payed those exchange rates periodically. Other than the $9.99 for trades that is the only fees I have ever paid them in 25 years as a client. I like the job they do with my RIF and all the year end tax stuff. Nevertheless I am very interested in not paying those rates as long as it does not jeopardize my relationship with them.

Thanks.

BTA

DTB

Why did you not use the gambit for your mother's transaction? And, if I may ask, have you ever done this gambit with td direct?


I did, with TD Direct Investing. I gave the example to show how terrible a standard broker’s exchange rates would be, if you didn’t have some way of getting your exchange done in some other way.

I don’t know if Norbert’s Gambit would work in other countries; I suppose it is conditional on having some security that trades in 2 countries that use the denominations you are interested in, and having a broker that supports trading in those two markets, and offering free transfers between accounts. Canada has all 3, but it may be unique. Does anyone know of an equivalent trade in other countries (euros to dollars, for example)?

Anyone can correct me if I'm wrong but if you have a margin account the broker can loan your shares and profit from that.

Anyone can correct me if I'm wrong but if you have a margin account the broker can loan your shares and profit from that.

I think you are right but I can’t think why that should bother a client. And sorry for the IB boosterism, but some brokers like IB actually share the borrow fee with the client who is lending the shares.

This is another example of IB’s basic philosophy, à la Costco, of charging clients based on the cost of their services plus a small profit, rather than taking advantage of them with hidden charges while making some things (like commissions) free.

Anyone can correct me if I'm wrong but if you have a margin account the broker can loan your shares and profit from that.

I think you are right but I can’t think why that should bother a client.

One reason it might bother a client, at least in the US, is that if the company pays a dividend that would normally be qualified while the shares are loaned out, the client still gets the dividend, but the dividend loses its qualified status, meaning it's taxed at a higher rate. Some brokers will make up the difference, but I don't think all, so it's worth checking for that if you're in the US and own shares that normally pay qualified dividends.

Brian

if the company pays a dividend that would normally be qualified while the shares are loaned out, the client still gets the dividend, but the dividend loses its qualified status, meaning it's taxed at a higher rate


ok, good point, I had heard that before but I had forgotten. It seems completely unfair to the client, and if it happens, the cost should surely be borne by the investor borrowing the shares, not the lender. But my understanding (perhaps mistaken) is that you lose the 'qualified dividend' status just by virtue of having your shares in a margin account, not because anyone is necessarily borrowing them. That would be a reason to avoid owning shares with a high dividend yield in a margin account, and putting them in a cash account or a tax-sheltered account instead.

dtb

if the company pays a dividend that would normally be qualified while the shares are loaned out, the client still gets the dividend, but the dividend loses its qualified status, meaning it's taxed at a higher rate

It seems completely unfair to the client, and if it happens, the cost should surely be borne by the investor borrowing the shares, not the lender.

I agree with this completely. It seems like shares being loaned out is a behind the scenes detail that an investor shouldn't have to know or care about. But the IRS hasn't asked for my input on this yet. :-)

But my understanding (perhaps mistaken) is that you lose the 'qualified dividend' status just by virtue of having your shares in a margin account, not because anyone is necessarily borrowing them.

I'm not sure about this, I think it's only if they are loaned out, but I could be mistaken too. I do know that I have a margin account at E*Trade and last year all the dividends were qualified and were reported that way on my 1099. However, with E*Trade I think I have to allow them to loan the shares even though they're in a margin account, which I haven't for just this reason. It could be that if I allow E*Trade to loan them, that would be enough to make the dividends non-qualified.

Brian

I told Fidelity awhile back to get all my accounts off margin ASAP and I haven’t looked back. It makes all these considerations and uncertainties about qualified dividends a moot point for me. I don’t have to think or agonize over it anymore. I’m an LTBH kinda guy anyways. Why should I let them profit over my stupidity, ignorance, and indifference to the whole issue.

took all my accounts at various brokers off margin and made them cash. removes any temptation for an idiot like me to try margin. and it prevents my holdings from getting borrowed. make yr bets with other people's holdings.

i have nothing against anyone who can make money this way. I just want to stay away from it.

Re IBKR something that might be interesting especially for non-US citizens:

Interest on cash: Cash in my Schwab account doesn't pay any interest, contrary to what I remember from long ago when all cash automatically went into a money market fund.

So I was surprised to receive from IBKR a message, telling me that up to now the cash in my new account earned $X.xx interest.

My vague theory: As several here said their Schwab account does pay interest I suspect that might apply only to foreigners like myself. That US money market funds are not accessible any more for non-US citizens --- and as my IBKR account is held in Ireland (which seems to be the case for most European IBKR accounts) the money probably goes into a European money market fund.

I am too lazy to find out, but whatever the reason is that cash in my Schwab account does not go into a money market fund any more, it does not apply to IBKR. Consequence: From now on greater cash amounts in my trading account at Schwab*** will be transferred to IBKR - and simply back to Schwab when needed there.

(***I love how simple options trading is with Schwab and hate IBKR's option chain screen; maybe that's because I currently do it on holiday with a little 10" laptop screen; remains to be seen how it is on a big monitor when back home.)


International wires: After being ripped of two times by banks (over 2% currency exchange losses) I intended to open a Wise (formerly: TransferWise) account to transfer money from my Schwab account to Germany or New Zealand. Not anymore. It's super-easy to transfer the money from the Schwab to the IBKR account, exchange it there for the real Forex rate (going around banks and their ripoff) into EUR or NZD, and transfer it to the German or NZ account.

With Schwab it is very easy to buy short term treasury bills to park cash. I wish it was that easy in my account with Hargreave Lansdown to do something similar for my UK cash.

Re IBKR something that might be interesting especially for non-US citizens:...

I have all the same experiences:
Unbelievable FX. Easy to move money between countries where you have accounts in your own name, though you can't pay money anywhere else. Easy to earn good interest.

And I agree the options chain contract selection panel is a total pain in the butt. The old one (discontinued about two years ago??) was great.

As I always use limit orders (as should everyone always, on both stocks and options) the options commissions are frequently negative. Presumably I am getting paid for providing liquidity?

Jim

What I wrote about using IBKR for international wires needs a - disappointing - correction: At least for a European citizen whose IBKR account usually is held in Ireland it is NOT "super-easy" to transfer NZD to New Zealand - - - but actually impossible.

I exchanged USD in NZD, tried to wire that - and was baffled to find that in the currency selection for the wire I could only select USD, EUR, other European currencies (Norwegian and Swedish Crone etc.) or Israeli Shekel. Those are the only currencies I can wire.

Phone call to helpdesk. Couldn't help, suspected legal restrictions, asked me to send a secure message. After 1-2 days without answer I researched myself and found it's indeed not a bug but a feature of (probably not only) IBKR, thanks to whatever (legal?) restrictions.

So the only way for me (and probably all other European IBKR customers) to use IBKR's excellent exchange rates for wiring NZD, AUD or else seems to be to setup a Wise account (I am in the middle of doing that), to wire the NZD, AUD or else to that account, and from there to it's final destination.

I hope at least that works, otherwise I am ......

Addendum, in case somebody in Europe might be interested in an IBKR account, thinking he can save Bank or Wise fees for money transfers no matter to which destination: Another phone call to IBKR (Australia this time) and 50min hold and I finally got definite confirmation that European customers can only transfer USD, CAD, European currencies or Israeli Shekel. In the future it might be possible to transfer other currencies too, but currently not. So International Brokers is not as international as one might think.

(My NZD therefore have to be converted back into USD, transferred to Wise, and from there for 0.48% fee to New Zealand. Thank you IBKR for having lost another 0.3% during the days passed until I finally was able to get that confirmed.)

i have found moneycorp to be almost as flexible as wise, no card, but otherwise excellent service for transferring, exchanging, paying stuff in europe in eur's..also as its based in usa, i dont have to bother with FBAR's. maybe it will work for you ?

moneycorp to be almost as flexible as wise...... maybe it will work for you ?

You probably adress me as I was the only one in this thread having talked about problems to exchange & transfer money (via IBKR). Thank you, but my problems are solved, though in a roundabout way. What I can report now, in case it may be of use for others:

A) Very easy and efficient to exchange money held in an IBKR account into whatever currency, EUR, NZD or else.

B) No problem to transfer money (EUR or Crone) into a European account (same for USD and Shekel).

C) Not possible to transfer any other currencies, like in my case NZD into a New Zealand bank account. You can exchange your USD or EUR into NZD --- but IBKR can't transfer them. So one has to
- transfer the original currency to Wise (or MoneyCorp etc.?)
- let them do the exchange into NZD
- and let them transfer the NZD for a fee of 0.48% into the New Zealand bank account.
The whole trip takes close to one week.

Summary: With IBKR you are limited to money transfers in just a handful of currencies. For more "exotic" ones you need Wise or similar (or a bank exchanging the money at one of the two ends, which results in effectively 2% or higher fees).

Post New

Mechanical Investing FAQ

---

Contact Shrewd'm
Contact the developer of these message boards.