Why to stay away from Swiss brokers

Whether you’re new to investing or already have some experience under your belt, critically assessing your choice of broker is always important. Different brokers have different fee structures, provide access to different financial products, and come along with different tax implications. Are Swiss brokers a good choice? What are other options? Let’s find out.

Stay away from Swiss brokers

As you probably hinted by the title, I am not a big fan of Swiss brokers. This is mainly because of three reasons.

1 – Transaction and FX fees

Despite having never used their services, I went through the pain of putting together a comparison table for the fees of a subset of Swiss brokers:

Last updated on March 22, 2020

Fee	CornerTrader	Swissquote	UBS
Account custody	CHF 0	max(CHF 15, 0.1%)	0.55%
Transaction fees*	USD 25	CHF 30	CHF 96
Currency conversion	max(CHF 10, 0.5%)	0.95%	Not specified

* Because transaction fees vary depending on volume and market/exchange, fees are calculated assuming a CHF 2.5k investment in US equities. This could be representative of a month’s worth of savings

If you’re like me, you’ll find the table above outrageous. For a monthly CHF 2.5k investment, you’re looking at a minimum effective fee of 1.5% (with CornerTrader) when factoring in the conversion CHF -> USD. More than 2% for Swissquote. What to say about UBS. Maybe that I even applied a 50% discount for online trades…. Why would anyone agree to give away at least 1.5% of their savings from the get-go?

And what about custody fees? Imagine your invested wealth was CHF 1m. All of it through UBS. You’d be paying almost twice as much in custody fees to UBS as you’d pay in wealth taxes to your canton, municipality and church. Combined. You can check the math here.

And this is not even the whole picture. Beyond the three types of fees captured on the table, some of these brokers will also charge you fees on outgoing payments. Ot to generate tax reports. Or to do you the favor of auto-converting dividends received to CHF. I’ve even seen some charging CHF 50 to close your account. None of the better alternatives we’ll discuss later charges a fee for any of this.

These three are just a subset of Swiss brokers. CornerTrader publishes a fee comparison against additional Swiss brokers [1]. It’s much less transparent, but you might be interested.

All-in-all, Swiss brokers are extremely expensive, and most certainly a bad personal finance choice for any long-term investor. I find it astonishing that some of them still have the gall to brand themselves as “trading fees savers”. Luckily there are much better alternatives. If you still don’t find the fees in the table above barbaric, wait until we put them in perspective with competitive brokers.

2 – Stamp duty

Swiss tax authorities force Swiss brokers to levy a stamp duty (or stamp tax) on securities trading. For the curious, a stamp duty is an archaic concept from the XVII century. Back then, it was customary to pay for a physical stamp impressed on documents to prove their legality [2]. Don’t ask me how this tax has made it to the 21st century. If you use a Swiss broker, stamp duties result in you paying [3]:

• 0.075% of the market value of Swiss securities (Swiss ISIN) upon purchase or sale
• 0.15% of the market value of non-Swiss securities (non-Swiss ISIN) upon purchase or sale

Because you have to pay whenever you buy or sell securities, you can see the stamp duty as a “turnover tax”. In other words, anytime you turn your portfolio (e.g. sell an ETF to buy a different one), you’ll incur stamp duty twice. For example, imagine you have $100k invested in VOO, and decide that you want to shift it to VTI. You’ll pay $300 in stamp duties fees alone. This doesn’t even consider transaction fees, conversion fees, bid-ask spread etc.

I won’t be harsh on Swiss brokers on this one, because there’s nothing they can do about it. This is Swiss law after all. I actually find it quite unfortunate that Swiss law discriminates against its own institutions. For us, stamp duties are basically an additional fee on top of everything we saw before. Because non-Swiss brokers are exempt, the balance keeps tilting in their favor.

Stamp duty tax applies to Swiss brokers only. International brokers are exempt

To clarify: whether or not you pay stamp duties depends on the domicile of the broker, not on the domicile of the security. You can still trade in the SIX Swiss Exchange without stamp duty through a non-Swiss broker.

If you’re like me and find Swiss stamp duties disgraceful, you might find some comfort in the fact that UK residents pay a staggering 0.5% stamp duty [4, 5]. They don’t pay it for all ETFs, but you get the idea. Two in distress makes sorrow less.

3 – Withholding tax implications

Swiss brokers are also forced by law to withhold an additional 15% tax on income from US securities (think of dividends, coupons etc.). This is referred to as Steuerrückbehalt USA, and goes on top of the 15% withholding tax levied by the US (the Pauschale Steueranrechnung, more info on this one here). This isn’t actually that big a deal. The Steuerrückbehalt USA is fully reimbursable. At least in theory. You just have to add it to your DA-1 form when you file your taxes. There is a whole entry explaining how the process works here.

Still, the whole process can be inconvenient. For starters, it adds steps to the tax declaration process. Even worse, if you don’t file your taxes, you might even lose the money.

In addition, as explained in this post, your broker has to be a Qualified Intermediary (QI) for you be able to get back the 15% withholding tax held in the US. This is the Pauschale Steueranrechnung we just mentioned. Honestly, I’m not sure if any of the Swiss brokers in the table above qualifies. At this point – because of the higher fees, stamp duty etc. – the optimal choice of broker won’t change. So it doesn’t matter that much whether any of the Swiss brokers is QI or not. The two broker recommendations that I’ll share with you in the next section do qualify.

What are better broker alternatives?

It should be pretty clear by now that Swiss brokers aren’t an optimal choice. We want to avoid through-the-roof fees, archaic stamp duties, and tax complications. What are better alternatives?

Adding non-Swiss brokers to the equation

Two very competitive brokers out there are Interactive Brokers (IB) and Degiro. In my opinion, they’re currently the best broker alternatives. Disclosure: I am not affiliated in any way to either. Let’s just see the facts:

Last updated on August 5, 2021

Fee	Interactive Brokers	Degiro	CornerTrader	Swissquote	UBS
Account custody	0	0	0	max(CHF 15, 0.1%)	0.55%
Transaction fees*	USD 1	EUR 2.75	USD 25	CHF 30	CHF 96
Currency conversion	max(0.002%, USD 2)	0.1%	max(CHF 10, 0.5%)	0.95%	Not specified
Stamp duty	0%	0%	0.075%-0.15%	0.075%-0.15%	0.075%-0.15%

* Because transaction fees vary depending on volume and market/exchange, fees are calculated assuming a CHF 2.5k investment in US equities. This could be representative of a month’s worth of savings

The table casts shame on Swiss brokers. The different in fees is abysmal. We’re talking orders of magnitude. Plus stamp duties are gone.

To put things in perspective, investing CHF 2.5k in US funds every month of the year would result in the following aggregated annual fees:

• Interactive brokers: CHF ~35
• Degiro: CHF ~65
• CornerTrader: CHF ~460
• SwissQuote: CHF ~690
• UBS: CHF ~1,200 (this doesn’t include conversion fees, which likely amount to additional CHF ~300)

These figures exclude custody/inactivity fees, generating tax reports, withdrawing money etc. In any event, the message is clear: IB and Degiro simply won’t rip you off.

Interactive Brokers vs Degiro

Which one of the two should you choose? I used to recommend Degiro because of its user friendliness. However, if you’ve read this post, you’ll know that US domiciled funds are a superior choice for Swiss residents. We discussed some of these funds here.

What’s the problem with Degiro and US domiciled funds? That you can’t buy them. Why? Because of an EU law (PRIIPS) that came into effect in 2020. This is an EU law. It doesn’t really affect Swiss citizens. But unfortunately Degiro is not making an effort to differentiate Swiss and EU customers. They simply blocked US funds for everyone in Europe. Which is a pity. You can find more info here and here.

IB does respect that PRIIPs doesn’t affect Swiss domiciled investors. At least for now. As a Swiss resident, you can buy US funds with IB. Because of that, I recommend Interactive Brokers.

On Interactive Brokers…

An additional advantage of IB is that you’ll have a multi-currency account. This means that can deposit/withdraw/hold balances in multiple currencies at the same time, which is quite handy.

IB also eliminated their $10/month inactivity fee as of July 1, 2021. You can check their latest fees here. With this fee eliminated, I see no reason to go with any broker other than IB.

If you also opt for IB, I’d suggest to access their services through their phone app. As a long-term investor, you shouldn’t download the trader workstation platform (TWS). TWS is a Bloomberg-like environment that will only bring you headaches.

Untangling the mess – Swiss securities and Swiss brokers

The implications of investing in Swiss securities (discussed here) are different from the implications of investing through Swiss brokers. The table below hopefully untangles the mess:

Type	Swiss broker	Non-Swiss broker
Swiss security	Stamp duty 35% withholding tax	35% withholding tax
Non-Swiss security	Stamp duty Additional 15% withheld for US securities (Steuerrückbehalt USA)	No Swiss withholding tax*

* But maybe other withholding taxes depending on country

Closing thoughts

The importance of fees

The way I see it, differences in fees and taxes are so big that the choice of broker should be a no-brainer. There is no “Swiss quality” to be found here. I recommend using Interactive Brokers or Degiro instead of Swiss brokers. More importantly, I encourage you to conduct your own research and be critical about what different brokers have to offer. You’ll save thousands of francs in useless fees down the line.

Most of the fees discussed in this entry are non-recurrent, meaning that they only happen once at the moment of trade. Optimizing these fees is important. Optimizing recurrent fees (e.g. TER, taxes etc.) is important as well. If you haven’t already, you should check this entry

The future of brokers

Looking into the future, I believe that both recurrent and non-recurrent fees will keep going down over the decade. We’re already seeing it. ETF providers are offering more and more low cost options. Today, we can build an ETF portfolio with a TER below 10bps (even just 3bps as discussed here). In parallel, platforms such as Robinhood or IB Lite offer true commission-free investing. Unfortunately, they’re only available for US residents. As usual, Europe is lagging behind.

At the same time, I believe (and hope) that investing knowledge will become more widespread among retail investors. More knowledge usually translates into better choices. And optimizing for fees is an important investing choice. Swiss players and the like will sooner or later have to adapt or die. Justifying 100x higher fees while hiding behind a curtain of “Swiss quality” will only last so long.

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Data sources and disclaimer

For Swiss brokers, the comparison tables use info from the three PDFs below, plus data from moneyland.ch [6, 7, 8].

Fees for Degiro fetched from their fee schedule [9]. Fees for IB obtained from multiple pages of their website [10, 11, 12].

All comparison tables represent the best of my understanding at the time of writing. They’re not a direct source of information from any of the companies discussed. Fee structures might be updated by any of the brokers at any time without notice. You’re encouraged to validate the figures or otherwise conduct your own research.

Last updated on November 2, 2023