Best banks in Belgium for investing

The high cost of investing with your bank

There's no question, many choose to play it safe when investing their money. And nothing seems safer than your bank that you've had your accounts for years with. But when it comes to investing, you'll be leaving a lot of money on the side.

Banks promote and sell actively managed funds. Essentially, it's where a fund manager working at a bank tries to be "smarter" than the market. It usually doesn't work. For instance, ESMA, the European regulator for the financial markets, found out that 75% of active funds perform worse than their benchmark index. The main reason is the high cost associated with active investing. Active funds are expensive, as the fund managers, analysts and other specialists at the bank need to be paid. You, as the investor, bear this cost. Yet all this effort doesn't translate to higher returns. In fact, it does the opposite.

In their book De hangmatbelegger, that Curvo co-founder Yoran wrote with Tim Nijsmans, they look at the historical performance of the main Belgian mutual funds promoted by banks over the last 5 years, and compared it to IWDA, a popular ETF that tracks the MSCI World index. ETFs are also called trackers because they simply follow an index, which is like a large basket of stocks.

Although 5 years is not long enough to draw conclusions, it is anecdotal evidence that supports the observation that passive investing leads to better returns than active investing:

Another example is KBC Equity Fund World (ISIN BE6213775529), an active fund managed and sold by KBC. It uses the MSCI ACWI index as its benchmark. But when we compare the fund's past performance to an ETF that tracks the MSCI ACWI, we see it has largely underperformed:

In this example, we can clearly see that the cost explains the overperformance of the ETF compared to KBC's active fund. ETFs are 10 to 20 times cheaper than the active funds at your bank. You can find ETFs as cheap as 0.05% in annual cost, while banks sometimes dare to charge more than 2% on an annual basis for funds. ETFs are cheaper because index funds are very cheap to run. Tracking an index is simple. You buy the stocks in the index and update when it changes. It doesn't need expensive analysts or other specialists.

On top of the ongoing costs, active funds offered by your bank often also have entry fees, and sometimes even exit fees. These fees are the main reason why you should avoid investing through these types of funds offered by your bank.

The superior performance of index-based funds is why Curvo is rooted in passive investing.

Investing in ETFs through your bank

Banks are waking up to the fact that many people want to invest in ETFs themselves and follow a passive strategy. With this in mind, some offer brokerage services, although often half-heartedly since it cannibalises the hefty profits they make from their active funds.

Financial assets like ETFs, stocks and bonds are traded on exchanges. The exchange is the place where buyers meet sellers. Known exchanges are Euronext Brussels, XETRA (Germany), the London Stock Exchange or the New York Stock Exchange. But when you want to buy a stock or an ETF, you can't just show up at the exchange. Instead, exchanges only work with companies that have the necessary license: brokers. By opening an account with a broker, you get access to the financial markets and invest. On top of this, some brokers offer additional services like analyses of stocks. These are usually targeted at more experienced traders.

Here's a list of the Belgian banks that allow you to invest in ETFs:

Some banks like BNP Paribas Fortis offer you the possibility of investing by yourself but they don't have a stand-alone broker platform.

The best Belgian bank for investing

It's difficult to choose the "best" bank to invest your savings. Banks certainly have a purpose in your overall financial life. If you’re looking to hold your money in a safe place for an upcoming financial project, like saving for a big holiday trip or the down payment on a house, banks are the best place to do it. They also serve as a great place to set up your emergency fund to access your cash if you need it for a rainy day. However, most banks aren't set up the right way to handle your long-term investments due to their fees.

More reasons why you shouldn't invest with your bank

Investing through your bank will likely result in high fees, with a low return for you as a consequence. Good for the bank's profits, but bad for you. But there are some further reasons why investing with your bank isn't the best option:

• Time-consuming: You may have to fix an appointment in-person at one of their branches with a bank officer. The banker may politely inform you over a coffee about some complicated financial portfolio and jargon that you should invest in this fund over another fund. Whenever we interact with a banker, we feel like we've been talking to a sales person rather than a financial advisor who has our best interests in mind.
• Lack of transparency: Let's face it, many banking officers at the local branch do not fully understand the products they're selling. They will hide behind pages of legalese, without telling you the information that actually matters.
• You may have to pay an exit fee: You may be able to withdraw your money but they will penalise you to do so. You end up paying a substantial exit fee.
• They think about their wallet before yours: Banks earn commission on the products they sell and what they offer may not actually be aligned to your best interests.

Investing without your bank

There are many ways you can invest your money. But we think that ETFs are the best way for most people to grow their wealth. To invest in ETFs, you can open an account with one of the brokers available in Belgium and buy your first ETF.

If you know little about investing, there are automated investment apps that will do the job for you and invest in ETFs automatically. That includes creating a balanced portfolio suited to you and your goals, then managing it. Best of all, this is done for a very low fee at a fraction of the cost of investing with your bank. Let's take a closer look at Curvo.

Curvo: a better alternative to superpower your savings

Investing in ETFs through a broker can be challenging. You have to build a balanced portfolio of ETFs aligned to you and your goals, and keep it in balance. You need to understand taxes. And broker fees make it cumbersome to invest monthly.

Making good investing accessible to everyone

We built Curvo to take away all these complexities of investing and turn it into a simple process, accessible to anyone. We understand that it's hard to build the portfolio that's right for you, so creating an account starts with answering a questionnaire on your investment goals and your appetite for risk. You’ll then be assigned the best portfolio of index funds that matches your goals and risk tolerance. Each portfolio is managed by NNEK, a Dutch investment firm licensed by the Dutch regulator (AFM). The portfolios are globally diversified, invest in over 7,500 companies, and are tax-optimised for Belgians.

Rooted in index funds

We firmly believe that index funds and ETFs are the best investment for most people to grow their wealth. That's why each portfolio solely consists of broadly diversified index funds that are tax-optimised for Belgian investors.

Adopt the best saving habits, without effort

Saving is easy when it's automated. Set up your monthly plan and get peace of mind that your money is working for you.

Summary

The next time you're considering where to invest your money with your bank, think again. Investing through a bank will cost you a lot, both in money and in return on your investment. Traditional banks sell managed funds that seldom perform well. Some banks are stepping up to the plate by offering brokerage accounts that allow investors to invest in cheaper ETFs. But they lag behind specialised brokerage platforms, which have our preference. Or, use an app like Curvo. It automates investing in ETFs at a much lower cost. This approach makes investing simpler and also saves a lot in fees compared to traditional bank offering making it a smarter choice for your long-term financial goals.