Fees in securities trading: custody account fees, brokerage fees, stamp duty and stock exchange fees
If you want to invest some of your assets in Switzerland in securities, you will have to pay to do so. You will generally incur the following fees:
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Created on 18.09.2019
Keep on top of management fees and other costs
Investments can lead to attractive returns, but they do also entail costs because, as an investor, you rely on services provided by various entities. The sum of these costs can vary substantially from one service provider to the next, and may have an impact on your return. This is why it is a very good idea to look carefully at these costs when choosing investments and providers. If you know which key figures you need to pay attention to, you will generally be able to compare them yourself without too much effort.
Management and custody account fees
In a custody account, you can manage shares , bonds and a whole host of other securities. To do this, you will pay a custody account fee. The principle is similar to a regular bank account that you use to manage your money. Just as with a bank account, you also generally incur an annual management fee with a custody account.
Brokerage fees
When you purchase or sell securities, you also pay a brokerage fee . This is a fee your bank charges for processing transactions. How much this brokerage fee is depends on the size of the order, as well as on the stock market where the securities you are purchasing or selling are traded.
Other costs (stamp duty and stock exchange fees)
You have to pay Swiss federal stamp duty for all transactions on the Swiss Exchange. For the purchaser/seller, this stamp duty amounts to 0.075% of the total transaction value for domestic securities, and 0.15% of this value for international securities. Additionally, stock markets also charge banks and brokers stock exchange fees. The majority of providers charge stamp duty and stock exchange fees to investment customers, and only in very few cases are these fees included in the brokerage fee. Generally speaking, these fees are for the most part negligible.
Custody account management fees and brokerage fees can vary enormously between providers. Swiss financial service providers do also provide information about the costs of their services online. It is well worth comparing costs before you make any investment decision.
Funds: issuing, redemption and management fees
Most investors use funds such as equity funds, bond funds or asset allocation funds to invest. Just like other securities, these are managed in a custody account, and so they also require a securities custody account if the account is only going to contain fund units. Various fees must be paid here too. The direct costs are charged to you directly:
Issuing commission
Issuing commission is a one-off fee when you purchase a fund unit. This is due the moment you invest money in the product. The amount of commission you pay is determined by the bank, and usually also depends on the investment sum. It is generally shown as a percentage, and deducted directly from the capital you are investing in the fund . At PostFinance, issuing commission is 1% on the purchase amount (max. CHF 1,000 or equivalent in foreign currency). Redemption is free of charge.
Redemption commission
Many investment funds also charge a redemption commission, which you pay when you sell your fund units. It is similar to issuing commission in how it works. PostFinance does not charge this commission.
Custody account fees
Many banks charge an annual custody account fee for fund custody accounts as well. It is worth making a comparison here, too.
Stamp duty
Unlike stock exchange trading, there is no stamp duty for funds domiciled in Switzerland. Investors will only incur stamp duty of 0.15% solely for funds they purchase that are domiciled abroad.
In addition to all these direct costs, there are also indirect costs such as custody bank commission and administrative costs that are deducted from fund assets.
Total expense ratio (TER) – a general overview of indirect costs
The “total expense ratio” (TER) must be disclosed for all funds. This provides information about the total costs that are deducted directly from a fund’s assets each year. Depending on what the product is, a fund manager will work on compiling the portfolio on an ongoing basis. This involves management commission being charged, which depends on whether the investment fund is being managed actively or if it’s linked passively to a benchmark index. Passively managed funds are often much more affordable as far as management commissions are concerned as the fund manager has less work to do. The TER is an important key figure when it comes to selecting investment funds, and it is mentioned in the factsheet. Depending on the product, it is generally between 0.5% and 2.0% This percentage is deducted from the total fund assets each year, and the total costs depend on how large your investment is. How high the TER is plays a critical role in a fund’s long-term return. When you compare returns from fund products, you should always ensure you compare cost-adjusted figures.
Cost control is well worth the effort
It’s up to you whether you select active or passive investment funds, or if you even decide to choose your securities yourself and that you wish to trade directly on the stock exchange. Find out more in the article “Active or passive fund management – what’s right for me?”. Whatever investment strategy you choose, you should still carefully compare the costs of implementing that strategy.
To find out what costs you will incur with PostFinance when you engage in e-trading on the stock exchange, see the article “Brokerage fees and other charges”. For fund costs, go to “Funds” in the menu “Prices and conditions”.
