After scrutinising all my investments and associated fees recently, I have made a decision that there is a strong need to explore new international brokers which can satisfy my needs, most importantly fees when it comes to cross-border trading.
I hope that this written guide will help you to also shape your thoughts process to find the “right one” for you. I strongly believe that everyone’s circumstances and priorities are different, hence there will never be a perfect one-size-fit-all solution, not in todays’ world at least.
- Why International Brokerage?
- Brokerage Selection Criteria
- My Selections – the “Dropouts” and the “Survivors”
- Interactive Brokers PRO
- TradeStation Global
- Trading 212
- Tiger Brokers
- TD Ameritrade (Singapore)
- Saxo Bank
- Why Interactive Brokers / TradeStation Global?
- Account Application
- Account Funding
- Worldwide Recognition
- Establishments and Regulations
- Fees Structure
- Other Features
- What’s Next?
Why did I suddenly look for international brokerage?
Truth to be told – I already have access to international markets and I didn’t really need another one because I wanted to access US/Hong Kong/Global markets. I needed it for other reasons.
Prior to ending my short-term assignment in Hong Kong sometime back in 2017, I’ve decided to open up my Fundsupermart Hong Kong account which provided me first-hand exposure to Hong Kong & US Markets.
Back then, like many of us, I turned a blind eye to the fees calculation, assuming that HKD$50 per trade (Hong Kong) is cheap and fees wouldn’t matter as much since I won’t be actively trading overseas.
Maybe that was not the real reason – I was lazy – so lazy to to do my research during my last few months/weeks in Hong Kong and since I’ve been with Fundsupermart Malaysia for years, I decided to go back to them without second thought.
And I thought those fees were cheap…
It was a bad decision which costed me some monies, but thankfully not for long (again I wasn’t actively investing overseas yet). I only found out this year when looking at my Cash Transactional History that there were “Dividend Handling Fees” charged for every dividend I have received. And the rate? HKD$30 for my Hong Kong stocks and US$2.50 for my US stock.
Whilst it was still “acceptable” for my Bank of China stock with approx. ~92% retained dividends; the same could not be said for my US stock where I merely retained ~8% of the dividends after fees and witholding tax (story for another day).
This got me thinking – there has to be some bigger brokerage house in Hong Kong, or International Market, which are willing to accept a small retail investor like myself but still providing competitive rates.
Frankly speaking, my filtering criteria is so strict that by the time I completed answering all of my own questions, there’s only a handful of brokerage house remaining for my deep-dive analysis (less than 3) hence the decision was so much easier.
There are so many international brokerage out there!
I had to start somewhere, but it was truly overwhelming when I first tried to look for the one. So I decided to introduce some structured selection process which will also help my thinking, making a more informed decision rather than going only with my gutfeel.
My Brokerage Selection Criteria
Must-Haves / Preferably-Haves
- Trading Fees: Preferably $0 commissions or low fees (<0.5%) per trade
- Recurring Fees: Must have zero inactivity fee, no minimum trading fee, and zero monthly fees.
- Other Fees: Must have no other hidden fees (i.e. Dividend Handling Fee) or Withdrawal Fees (just in case if I have to liquidate my assets)
- Minimum Balance: Must have low barrier for entry (low capital)
- Establishment / Reputation: Established brokerage house with strong cash reserve / capital protection
- Worldwide Access: Access to US Market is a must with London-Exchange being a strong plus point (for Ireland domiciled ETF, long term holding). Access to other developed markets’ stock exchange is a bonus (fees must be equally competitive)
- Licensing / Regulation: Licensed and regulated by reputable Monetary Authorities, preferably internationally recognised.
- Multi-Currency/Exchange: Built-in multi-currency holding with competitive spot-rate exchange rate is a bonus
- Funding Process: Preferably with options to fund via local bank accounts, other than direct international transfers
- Data Access: Real-time data, analysis reports, etc. are all a bonus
- Beginner Friendly: Preferably easy-to-use web (or mobile web) interface for beginner trading
- Account Opening: Preferably easy (and fast) application process
- Fractional Shares: Access to fractional shares trading a bonus
To make my life easier, I have created an excel spreadsheet to compare all of the above criteria, giving a rating between 1 – 5 for each of the requirements with ‘must haves’ weighting double of the ‘nice-to-haves’. If you are interested to do a similar comparison yourself, feel free to download/make a copy of the Brokerage Comparison Sheet.
After spending ten of hours comparing all the criteria above…
At a glance, you can see that I only shortlisted 3 potential options for my usage completely based entirely on my personal preferences, priorities and circumstances. In case if you are wondering on the scaling process for each of criteria (column) –
- First, I split my list of criteria into two buckets of “Must haves” vs “Nice to Haves” (as indicated in previous chapter)
- For each criteria, I individually assess them against my list of listed brokerage from 1 (least suited to my needs) to 5 (most suited to my needs)
- In the end, I will sum all the points allocated per brokerage house. For “Must Haves”, the total score will be doubled (since it emphasises higher importance of having those needs)
Here’s a little legend chart to simplify the explanation. Again, feel free to to download/make a copy of the Brokerage Comparison Sheet if you are interested to do a similar comparison yourself.
Before going to the shortlisted ones, I ought that most of you would be curious why are some of the popular choices amongst Malaysians are dropped?
This was amongst the first choice that I have heard and looked into when I first started seeking out for international trading. The main reason of dropping it is simple – while they are being regulated by established monetary authorities, they lack worldwide access.
It may have worked if I were only looking for US-only trading but I am not – I have my Hong Kong portfolio which I plan to move out of Fundsupermart Hong Kong as previously explained.
They’re also a fairly new player established in 2006 – innovation is good, Whilst they are regulated, but I want to be 200% sure when it comes to placing my money for long-term.
p/s if you’re still keen to sign up and you’d like to support me, feel free to use my referral link to get free $50 upon successful deposit
TD Ameritrade (Singapore)
This was the second choice that I was looking into, after hearing it from colleagues of mine where she and her husband have been using thinkorswim by TD Ameritrade Singapore for a while and had good experiences.
Main reason of dropping out? Their hassle funding process – direct USD funding from own-account, leaving myself with no other choice than International Telegraphic Transfer which I absolutely loathed.
Another minor pain-point was the $3,500 minimum deposit and $25 withdrawal fees which I do not want to deal with in the future. Let’s also not forget that their account opening is painfully slow, with some waiting for months since submitting their documents.
This was really a tough choice for me to drop – I really liked their user-friendly interface, their lower-fees (except US stocks) when compared to TradeStation Global, and leverages the same backbone of Interactive Broker.
Main reason of dropping them? They’re new player established less than 5 years ago and are still in the “investment / acquisition” stage and have just became profitable this year. Still, they’re a strong contender and I will revisit them in years to come, but for now, I’ll have to let them pass for the same reason I let eToro go.
Well – let’s just say that the minimum deposit of $10,000 put me off almost immediately and I didn’t even bother looking further (except for when compiling the chart above :P)
And The Survivors?
That leaves us with only 3 contenders, or I should say, the shortlisted ones for now. I didn’t really want to pit them against each other as it’s obvious who would be the ultimate winner based on my preferences. Rather, I will explain how I plan to leverage these platforms for today and my plans for tomorrow.
Interactive Brokers (PRO)
I liked this the most – it ticks all of my checkbox except for one, which is the inactivity fee charges on a monthly basis. The only way to bypass this is to either trade enough to generate $10 commissions per month, or to have $100,000 portfolio holdings with them.
As much as I’d like to go with them, I will have to park them aside until I have at least $150,000 portfolio size to avoid the monthly fees, taking into consideration potential short-term fluctuations in the market.
There’s also an zero-fee IBKR LITE plan which has most features of IBKR PRO, minus the fees; but unfortunately are restricted only to US citizens at this stage.
VERDICT: Primary international brokerage to hold all my core portfolios, positioned for long-term investing, in the FUTURE.
And that’s why it’s a no-brainer choice for me – the only way to tap into most of the capability that Interactive Broker offers to their PRO clients, without the monthly inactivity fees, would be through TradeStation Global.
Long story short, TradeStation Global is the introducing broker for Interactive Brokers, kind of like partner-in-crime if you put it that way. They are basically leveraging most if not all functionality (except fractional shares) which are offered by IBKR PRO, with way lower minimum threshold to activate the account with merely $2,500* dollars in portfolio size or cash equivalents.
With my semi-passive long-term investing style, this would be a perfect fit as most of my purchases would be buy-and-forget(hold) and only checking in once in a while, to top up or rebalance my portfolios.
One downside is – without zero commissions, even if I want to allocate a small portion for active-trading (to learn new stuff), it wouldn’t be worth the commissions paid.
VERDICT: Primary international brokerage to hold all my core portfolios, positioned for long-term investing, as a START FOR NOW.
* UPDATE 18 DECEMBER 2020: Tradestation Global just increased the minimum holdings to USD2,500 effective 1 December 2020 for new customers.
You probably have imagined it already – this is where Trading 212 comes to the rescue. Whilst they are relatively new and established only in 2004, for a supplementary “active trading account”, the risk appetite would be greater, since this would likely to only attribute to <1% of my portfolio holdings.
With zero-commission trading, access to US stocks with Fractional Shares and zero-withdrawal fees, minimum deposit of $1; this is perfect for my “playground portfolio” for some active tradings without incurring any fees.
There are some downsides which I hasn’t figured out yet but I’ll find out more in the future – concerns surrounding the process to fund the account with lowest-possible-fees (since they have limited currencies support) or withdrawing from the account with lowest-possible-fees (since they only transfer to own-named accounts)
VERDICT: Secondary US brokerage to hold my playground portfolios, positioned for short-term trading. Though I won’t be really active here as it is mostly for learning only.
* UPDATE 24 DECEMBER 2020: Trading212 just announced that effective from 4 January 2021, they will be introducing a lifetime limit on free deposits via all payment methods other than Bank Transfers. Deposits via these methods will remain fee-free until we have deposited €2,000 in total. A fee of 0.7% will apply thereafter.
But still… Why Interactive Brokers/TradeStation Global?
I know some of you would still be interested in some comparison in details, or explanations on why I went with the above choices. I’ll try to address them in this chapter for each of the laid out categories, mostly focusing on Interactive Brokers (IBKR) and TradeStation Global (TSG) here since they have been selected as my primary broker for now and the future.
How easy was it to open an account?
Truth to be told, it was quite confusing at first when I had to open my TradeStation Global accounts and with them redirecting me to Interactive Brokers website, with zero email notification throughout the registration process until after the account was opened. Had I not paid extra attention to the progress and follow through by saving the link, username and password, I might not even be sure if my account was opened at all 😛
I’ll definitely be writing a detailed guide sometime down the road, but the short version of it is that, since TradeStation Global is mainly an introducer to Interactive Brokers, most of your registration steps would be done with Interactive Brokers and only after your successful funding / account activation, then you would receive your TradeStation Global credentials (which I never used, until now).
Having said that, the entire process was pretty good as all you need is to fill up online forms, submit a few attachments, fund your accounts and you’re good to go.
How do I even fund my account?
Speaking of funding – you might have recalled my previous post of opening a CIMB Singapore account, and that was basically a precursor prior to me opening an IBKR/TSG account.
There are few ways to do it when it comes to account funding, but with my typical kiasi / conservative mentality, I decided to play it safe by ensuring that when it comes to paper trail, it is as clean as it get hence when given the options to fund my overseas investment account, I will always opt for own-name transfers whenever possible.
Example: My Personal Account > IBKR Account
The only time I’ll be willing to use third-party name transfers are when I initiate transfers between my own accounts across different countries.
Example: My Malaysia Account > TransferWise > My Singapore Account or My Hong Kong Account
Doing it the safer way have a price to pay as well – since I need to incur double currency conversion, from Ringgit to Transit Currency (SGD/HKD), and subsequent funding it into IBKR and if needed, convert to another currency using their real-time spot rate, sometimes cheaper than what you see on Google.
Good news is – IBKR do accept 3rd party named transfer from the likes of TransferWise or InstaRem, though they reserves the right to audit your paper trail at random, so just be ready with your bank statements to prove the money trail if you happen to be audited by them.
Worldwide Recognition for Currencies and Stock Exchanges
Since Interactive Brokers have been pretty established (more on that later), they have presence or office in some of the world’s major markets – such as Hong Kong, Australia, UK, Singapore, US, etc., which also means that they will have a local bank account in those countries.
Whilst I’m not sure how broad is their presences for local bank accounts, one thing I am sure is both HKD and SGD local transfers are included. That basically means that I can choose one of two routes (Hong Kong or Singapore) if I ever need to fund my IBKR account, whilst paying minimal foreign transfer fees thanks to cheap international transfers via Transferwise.
This is mainly made possible thanks to their multi-currency holding (up to 22 different major currencies, incl. HKD and SGD), and a real spot-exchange rate with zero markup on exchange rate, though they will charge you a flat $2 per currency conversion.
For example, if I choose to fund my account through HKD,
- I will initiate a Transferwise from MYR to HKD, directly into my Hong Kong account
- Subsequently I will perform a local transfer, from my Hong Kong Account into IBKR’s Hong Kong account using local HKD currency
- In IBKR, I can choose to keep these cash as HKD and use it to buy my favourite Hong Kong stocks; or choose to convert it to any other 20+ worlds’ major currencies and buy stocks in those respective markets (e.g. GBP for Irish domiciled ETF; USD for US stocks), with real-time spot rate
Speaking of which, whilst they do not have access to every single stock exchanges in the world *cough* Malaysia KL Stock Exchange is not there *cough*; they have a respectable number of stock exchanges included. My primary ones for now would be US Stocks, London Stocks, Hong Kong Stocks and maybe Singapore Stocks.
How about their Establishments or Regulations?
In case if you are wondering, since we open our accounts with TradeStation Global (UK) as the introducer, you’ve probably guessed it – the counterpart is basically Interactive Brokers (UK) which both of them are regulated by Financial Conduct Authority (FCA) in the United Kingdom.
Since our securities are managed by Interactive Brokers, my focus will naturally be on them. You can check their financial statements here or in other websites (since they’re listed company) but my summary would be: They’re cash rich, have no long-term debts, separates our assets from their company, and have survived through financial storms between 1978 – 2020, with strong guiding principles ensuring investors’ protection.
One of the main reason why I decided to go with Interactive Brokers.
Let’s talk about Fees
Now let’s talk about the elephant in the room – Fees.
Fees have always been one of the top reasons which eats into your long-term profits, compounded. So if there’s one thing that must be transparent, it would be the fee structure.
- Trading Commission: typically at the range of ~0.12% or minimum $1.50 depending on currency / stock exchanges, which are cheap.
- Recurring Fees:
- NONE if applied via TSG and maintain minimum $2500* portfolio (cash or stock equivalent)
- $10 / month if applied via IBKR directly, waived if you generated at least $10 commission during that month or portfolio size in excess of $100,000
- Other Fees:
- Withdrawal Fees: $0 for first withdrawal of the month, $10 thereafter
- Dividend Handling Fees: NONE
- Currency Exchange Fees: flat $2 per trade
It might be slightly confusing since there’s two pricing tables/source but just remember this – if you applied via TSG, all pricing will follow TSG model, except if you took-on additional subscription / features from IBKR themselves.
* UPDATE 18 DECEMBER 2020: Tradestation Global just increased the minimum holdings to USD2,500 effective 1 December 2020 for new customers.
IBKR by itself operates on a “subscription model”, providing everyone with essential / basic access to its core functionalities such as delayed quote, fundamental reports and analysis, access to use Desktop App / Web App / Android App / IOS App, etc.
For everything else optional or nice to have, such as Level 2 data (real time quote / stock charts per stock market), they offer it as an ala-carte add-on subscription. Kinda like Netflix (basic) plan providing you access to view / stream on one device, allowing you to go up in functionalities as you pay more, except that it is on ala-carte basis hence providing you with more freedom. if you want Netflix (4K) but only 1 device, you cannot – since it is already bundled in their 4K package.
Since we are applying via TradeStation Global as the introducer broker, there might be some limitations which are set by Interactive Brokers, and the only one I have noticed so far is Fractional Shares being disabled in our accounts. But that’s a good trade-off i my opinion, in exchange for getting rid of the monthly inactivity / minimum commission fees.
I will elaborate more in the in-depth Interactive Brokers’ guide in my future postings but for now, let’s just say that their web-application and mobile-app is actually not too bad.
Definitely not the most fluid User Interface (UI) / User eXperience (UX), but good enough for me to navigate on my own without watching any videos or tutorials.
Phew.. this have really been a long post. I always thought that it will be a short one but I just can’t stop adding more of my thoughts, but I hope that this have provided you at least with some insights on how I rationalised on my selection of international brokerage, before finally landing on Interactive Brokers’ partner, TradeStation Global as my core international broker, followed by Trading 212 as my supplementary active trading for US markets.
As with all things in life, do your own comparison and find out what’s best for you – as your circumstances, preferences, priorities or thresholds may be different than mine. Regardless which, I hope that the general selection criteria would still be able to help you to choose.
In the future, I will be diving more into the process of using TradeStation Global / Interactive Brokers / Trading 212 to provide more in-depth insights and guides based on my trading experience so far.
- If you are interested in opening a TSG account – be sure to check out Investing in International Stocks via TradeStation Global with comprehensive step by step!
Thanks for reading and I will see you again in my next post!