Question Private banking - 7/8 figures, white and safe

[rowena]

This is valid for institutional investor,
I’m an individual investor. I read somewhere that for individual investors IB acts as the depositor/custodian which means the risk stays with IB.

IB use custodian banks but even if IB acts custodian, your assets are separated/recoverable in case of IB bankruptcy but ensure that you have a cash account not margin etc.. The most significant risk is insider fraud but it is unlikely because IB is a public company. They're audited more and strictly and everyone can access their financials.

https://www.interactivebrokers.com/en/index.php?f=2334
Another option is Saxo Bank. They use Citibank as custodian. If Saxo bank fails, you should able to recover your funds from Citibank. If Citibank fails, you should be able to recover your funds because custodian accounts are not assets of bank/financial institutions. This means creditors cannot access to custodian accounts. Custodian accounts are segregated. The downside of Saxo Bank is they're not a public company and smaller than both IB and SQ.

You can also go with tier 1 banks like Citibank IPB, HSBC, BNP Paribas but expect 0.50% custodian fee + 1% transaction fee but still not guarantees that your assets will hold with the bank. Even banks use different custodian banks depends on asset origin, market, currency etc...

 

[Silvio]

You can also go with tier 1 banks like Citibank IPB, HSBC, BNP Paribas but expect 0.50% custodian fee + 1% transaction fee but still not guarantees that your assets will hold with the bank. Even banks use different custodian banks depends on asset origin, market, currency etc...

Damn, if that's the case why would anyone pay these banks 0.50% custody fee if they may still hold the assets at a different bank...
Any advantages of them versus for example SwissQuote CH\LU which have a cap on custody fee for year (I think around 200 EUR or so)? Sounds like your custodian risk is pretty much the same.

 

[jjrapy]

Damn, if that's the case why would anyone pay these banks 0.50% custody fee if they may still hold the assets at a different bank...
Any advantages of them versus for example SwissQuote CH\LU which have a cap on custody fee for year (I think around 200 EUR or so)? Sounds like your custodian risk is pretty much the same.

Can you use swissquote just to park some money? without doing any trading transactions. Just some deposits and withdrawals.

 

[Fred]

IB use custodian banks but even if IB acts custodian, your assets are separated/recoverable in case of IB bankruptcy but ensure that you have a cash account not margin etc.. The most significant risk is insider fraud but it is unlikely because IB is a public company. They're audited more and strictly and everyone can access their financials.

https://www.interactivebrokers.com/en/index.php?f=2334
Another option is Saxo Bank. They use Citibank as custodian. If Saxo bank fails, you should able to recover your funds from Citibank. If Citibank fails, you should be able to recover your funds because custodian accounts are not assets of bank/financial institutions. This means creditors cannot access to custodian accounts. Custodian accounts are segregated. The downside of Saxo Bank is they're not a public company and smaller than both IB and SQ.

You can also go with tier 1 banks like Citibank IPB, HSBC, BNP Paribas but expect 0.50% custodian fee + 1% transaction fee but still not guarantees that your assets will hold with the bank. Even banks use different custodian banks depends on asset origin, market, currency etc...

That's true and confirmed by several Private Banks with Office in Dubai including Banque Havilland.

Due to a lot of client requests regarding switching from IBKR to a Private Bank regarding more "security" - we met several Private Banks in Dubai and there were only the ones that didn't listened at all and just want to take the custodian fee from you and the ones that told us the same like @rowena mentioned and that there is no point for Private Banking for just the purpose of holding stocks/ETF's.

Banque Havilland was even so kind and explained us 2 hours in person how it's working and it's exactly like @rowena mentioned.

So nothing wrong with IBKR and it's more a myth or let's say some personal reason why somebody should switch from IBKR to let's say UBS.

 

[troubled soul]

That's true and confirmed by several Private Banks with Office in Dubai including Banque Havilland.

Due to a lot of client requests regarding switching from IBKR to a Private Bank regarding more "security" - we met several Private Banks in Dubai and there were only the ones that didn't listened at all and just want to take the custodian fee from you and the ones that told us the same like @rowena mentioned and that there is no point for Private Banking for just the purpose of holding stocks/ETF's.

Banque Havilland was even so kind and explained us 2 hours in person how it's working and it's exactly like @rowena mentioned.

So nothing wrong with IBKR and it's more a myth or let's say some personal reason why somebody should switch from IBKR to let's say UBS.

In which situation one should switch to IBKR to Private banking (UBS, Banque Havilland, BNP paribas etc ) ??

 

[Tr0nad0r]

Can you use swissquote just to park some money? without doing any trading transactions. Just some deposits and withdrawals.

You can always trade some ultra short-term bond ETFs and earn 2% yearly.

 

[Martin Everson]

That's true and confirmed by several Private Banks with Office in Dubai including Banque Havilland.

Banque Havilland....lol. Has anyone even looked at what that banks real activity is? Or the plan it hatched to try and destroy Qatar economy...lol?

 

[BlueMist]

Another option is Saxo Bank. They use Citibank as custodian. If Saxo bank fails, you should able to recover your funds from Citibank. If Citibank fails, you should be able to recover your funds because custodian accounts are not assets of bank/financial institutions. This means creditors cannot access to custodian accounts. Custodian accounts are segregated. The downside of Saxo Bank is they're not a public company and smaller than both IB and SQ.

You can also go with tier 1 banks like Citibank IPB, HSBC, BNP Paribas but expect 0.50% custodian fee + 1% transaction fee but still not guarantees that your assets will hold with the bank. Even banks use different custodian banks depends on asset origin, market, currency etc...

Now the funny part. Saxo is using Citi as a custodian and Citi AE is using UBS Swiss as custodian Citi AE charges 0.2% (of UBS) custodian fees, while UBS themselves charge 0.6%, I perhaps will understand the logic in these one day.

Also there are reputable brick and mortar banks which has no custodian fees like Standard Chartered Singapore. Although the trading fees are 0.2%, long term free hold definitely makes it a win situation. I use SQ LU and find their €15 monthly fee reasonable. What I don't like with SQ LU is that one has to be careful to not forget to trade at least once every 24 months otherwise 0.3% custody kicks in... Still I like these 2 options more than IBKR, which simply does not appeal to me. 1st it is US which makes no sense to me as European living in Dubai. 2nd it is not a bank, doesn't held banking licence. I know people love IBKR like they love Facebook and Instagram. And this horrible interface on IBKR and what's wrong with their XETRA naming, like if they couldn't name it as anyone else

But I am happy to hear private banking suggestions. So far Martin was trying to suggest some South African options (as a better alternative to SC SG or SQ LU), which honestly nobody heard about apart from people living in RSA (or RSA expats in UK perhaps) and this forum

Citi IPB UK has 0.5% custody fee. LLB Liechtenstein has custody fees of 0.20% - 0.30% but high trading fees 0.50% - 0.75% (+0.15% Swiss stamp). Both the custody fees and trading fees are negotiable. I spoke to LGT Bank in DIFC, they told me custody fee is 1% but negotiable.

Coutts between 0.3% and 0.15% (not bad for a name like Coutts) but the trading fees are up to 1.20% depending on the volume.

 

[manilobino]

As you may not know I hold a ton of accounts between banks and EMI's. I think that answers the question.

I don’t mean to pry But if as you mention above - investing in a EU bank ensures your securities are protected even from the bank’s own bankruptcy - why would you or anyone need to hold more than 1 account?

EDIT: also, would you equally entrust brick and mortar banks such as UBS/CS/BGL BNP Paribas and traders such as IB,Saxo,SQ with millions worth of securities/cash?

 

[troubled soul]

It is always better to have multiple bank/broker/EMI account.
Timeless advice do not put all your eggs in one basket.
You do not know what happen tomorrow.

 

[Silvio]

I don’t mean to pry But if as you mention above - investing in a EU bank ensures your securities are protected even from the bank’s own bankruptcy - why would you or anyone need to hold more than 1 account?

EDIT: also, would you equally entrust brick and mortar banks such as UBS/CS/BGL BNP Paribas and traders such as IB,Saxo,SQ with millions worth of securities/cash?

Banks can go down, accounts can be frozen, wires can be put on hold until you provide more KYC. The more accounts you have the more flexible you are.

Also some banks don't allow (or don't like) 3rd party transfers, some do. Some banks are better for buying stocks, some are better for keeping in custody, some banks accept crypto, some don't. Always better to have multiple accounts in multiple jurisdictions because on a long enough timeframe many unlikely things will eventually happen and you want to be prepared.

 

[Martin Everson]

I don’t mean to pry But if as you mention above - investing in a EU bank ensures your securities are protected even from the bank’s own bankruptcy - why would you or anyone need to hold more than 1 account?

Maybe some people don't believe in keeping all their eggs in one basket. Maybe some people have experienced their bank account being frozen or bank disappear (hint me). Maybe some people have moved around a lot and hence have built up a huge number of banks. Maybe some people wish to use different banks for different things.

EDIT: also, would you equally entrust brick and mortar banks such as UBS/CS/BGL BNP Paribas and traders such as IB,Saxo,SQ with millions worth of securities/cash?

I would look at the balance sheet of the bank. Equally important also look at whether the bank is systematically import in its host country and is considered a local bank in its host country rather than a foreign bank. UBS/CS are systematically important banks in Switzerland so Swiss government will have their back no matter what - bailing out UBS in 2008 crisis as we remember. Even to an extent Bank of Georgia in Georgia is a consideration. Georgia has a junk rating sadly but BoG is a systematically important bank in Georgia so government will have their back no matter what. Likewise BOV in Malta etc etc.

P.S I would neve use a broker like IBKR again. Its a junk discount broker plus american so I could not sleep at night. I talked already about how FDIC went almost bust in 2008-2009 crisis...lol.

 

[rowena]

And this horrible interface on IBKR and what's wrong with their XETRA naming, like if they couldn't name it as anyone else

IB changed its interface. It was not good but now they have the best UI right now(compared with SQ and Saxo). If you compare mobile apps, then SQ is number 1.

 

[no1d]

@manilobino hopefully your problem is solved but what route did you go? Have you found good banks for your assets?

 

[manilobino]

Not yet. I approached some banks, but when they hear I am interested in “self managed investment custody” - they mostly go “we are interested in clients who we profit from, going for our discretionary investments route”.

 

[wheelspin]

any update @manilobino ?

 

[JackAlabama]

any update @manilobino ?

also on the safe and stable gov bonds etf of developed countries which is down 20+%

 

[backpacker]

also on the safe and stable gov bonds etf of developed countries which is down 20+%

ETF's and mutual funds that are build on government bonds of developed countries have -once again- proven to be one of the most useless products the financial industry has on offer.
Diversifying these already low yielding bonds via an ETF's lowers the yield even further and, as we can see now, is all but safe.

 

[JohnnyDoe]

Not yet. I approached some banks, but when they hear I am interested in “self managed investment custody” - they mostly go “we are interested in clients who we profit from, going for our discretionary investments route”.

Banks are there for making profits (at least the few that do not exist just to scam people/investors, launder money etc). So you should try to make them happy.
Credit Suisse, UBS and Cité Gestion are the only ones I can recommend.

 

[Forester]

Banks are there for making profits (at least the few that do not exist just to scam people/investors, launder money etc). So you should try to make them happy.

Agree at 100%.
Sometimes, going through some family wealth office could help remarkably. (They usually have some long-term relationships with banks related to more clients and sometimes can build something that you cannot build alone.)

Credit Suisse, UBS and Cité Gestion are the only ones I can recommend.

I understand, @JohnnyDoe. Personally I would avoid Credit Suisse (frankly, I do not think it is dangerous to have there some assets; but I do not liked the way how they served the clients, not at all). UBS is OK and Cité Gestion is relatively new – but why not. For 7-8 figures I consider Rothschild (I mean Banque Privee Edmond de Rothschild SA, Geneve) also recommendable. In Liechtenstein, I would consider Liechtensteinische Landesbank and LGT. And generally, some diversification is necessary, IMO.