Choosing a broker is an important step when investing. There are many different options available, so picking the right one for you is challenging. We compare investing in ETFs through Directa and DEGIRO, two brokers available to Italian investors. The goal of this article is to help you find out which broker is best for you for investing in ETFs. We’ll compare the brokers based on their fees, convenience, the ease of setting up an account and importantly the safety of your assets.
The overview
The table shows an overview of how Directa compares with DEGIRO for different criteria. Read on to get the full details!
Directa
Story of Directa 🇮🇹
Directa Sim is one of the first online trading platforms available in Italy. Founded in 1995 by three professionals from Turin with the idea of connecting private investors directly to the Italian stock exchange. Over the years, with the growth of the web, online trading became the most immediate way to access the financial markets directly and Directa took advantage of this popularity to offer an increasingly complete service. In 2000, it allowed its customers to buy and sell securities on the US and then world markets. By 2007, it expanded abroad, opening in Germany, France and the Czech Republic. Today, it has more than 80,000 open accounts and is one of the most important Italian brokers with €4.7 billion in total client assets.
Fees for ETFs
Like many other online brokers Directa offers advantageous conditions for buying ETFs and subscribing to PACs. Let's take a look at the breakdown for buying ETFs which is dependent on the market you'll be purchasing from:
"Zero Commission" promotion
Directa, thanks to partnerships with several ETF providers, offers a varied list of ETFs that can be purchased with zero fees. In many cases, however, it is necessary that the transaction amount exceeds €1,000. Providers include the large asset managers like Blackrock, DWS and Vanguard.
Convenience
Directa is based in Italy and handles all the taxes for you through the administrative regime. They also offer a savings plan (PAC) which makes it easy to set up a plan. The downside is that Directa does not offer fractional shares which is frustrating as not all your money is thus invested.
Setting up an account
Setting up an account with Directa is smooth although approval takes between 2 and 4 business days. Directa doesn't allow you to set up a joint or child account but you can create an account for your business.
Safety
As Directa is based in Italy, it is regulated by CONSOB. It hasn't had any issues with the regulators as far as we know. However it engages in securities lending of your assets. You are covered by the investor protection scheme bu your cash isn't safeguarded by the deposit guarantee.
The full review
Learn more about the pros and cons of investing through Directa in our review.
DEGIRO
Story of DEGIRO 🇳🇱🇩🇪
The founders of DEGIRO were former employees of BinckBank. They founded the company originally in 2008 and originally focused on professional investors. However, they started to reach success once they launched their online trading platform in 2013. They quickly grew across the European Union and now serve more than 2.5 million customers which makes it one of the largest brokers.
DEGIRO is now part of the German Flatex bank. It has thousands of ETFs and stocks to choose from and it’s one of the brokers on the market that offers the best value. Like many brokers, they started with stocks, but you can now also trade commodities and make margin calls.
Fees for ETFs
Essentially, DEGIRO charges two types of fees:
- transaction fees
- connectivity fees
The transaction fee depends on the inclusion of the ETF in their core selection. For those ETFs, the transaction fee consists only of a €1.00 handling fee, instead of €3.00 for ETFs not in the core selection. There's a caveat though: you need to buy the ETF on the right exchange. ETFs are traded on stock exchanges. Famous ones are the New York Stock Exchange (NYSE) or Nasdaq, or Xetra and Euronext Amsterdam in Europe.
As an example, buying €1,000 of the popular iShares MSCI World Accumulating ETF (known as its ticker IWDA) when using the Italian DEGIRO will cost just a €1 transaction fee when buying it on MTA Italian exchange.
A peculiarity of DEGIRO in comparison to other brokers is that they charge a connectivity fee of €2.50 per stock exchange per year. This means that you need to pay €2.50 in a given year for each stock exchange where you've purchased or sold anything.
As an investor, you have to choose which exchange to use in order to reduce the fees. DEGIRO waives the connectivity cost for the home exchanges:
- 🇮🇹 DEGIRO.it: no fee for the MTA Italian exchange
DEGIRO's fee structure varies per country which can make it confusing.
Convenience
For Italian investors, you'll receive an annual tax report from DEGIRO. You'll have to manually take that date and input it into your tax reports. You'll have to declare your income, capital gains as well as the IVAFE (wealth tax). Note that you'll have to complete this manually as DEGIRO puts the burden on you as an investor and they have previously made errors in their tax reports.
Setting up an account
Account openings for DEGIRO are quick and usually only take a day. It's a fairly smooth process. Unfortunately they don't support business, children nor joint accounts.
Safety
DEGIRO is one of the few brokers that have had past issues with regulators, namely the Dutch regulator (AFM). They also lend out your securities, as well as receive payment for order flow, a controversial revenue model for brokers.
The full review
Learn about all the pros and cons of investing with DEGIRO in our in-depth review.
Curvo: easier than a broker
Brokers push you to trade and to pick individual companies to invest in. Rather than picking individual stocks such as Amazon or Tesla, index funds are a way to buy the whole market, across all sectors and regions of the world. Essentially, you own a small portion of thousands of companies throughout the world. Instead of betting on a particular company, you are placing a bet on the global economy.
Rather than having to pick the right stocks or ETFs among the thousands available through Directa or DEGIRO, you invest in a portfolio that is tailored to you and your goals. These portfolios are composed of globally diversified index funds, meaning you earn a piece of the growth of the global economy, and they're best suited to make the most of your savings long term. And they're secure, as they're managed by NNEK, a Dutch investment firm under supervision of the regulator in the Netherlands (AFM).
We believe that investing is an important tool for our generation to improve our financial well-being and to prepare for our future. We are building Curvo to fulfil that vision, by making good investing easy and accessible to all:
- Diversified portfolio set up for you: The best portfolio for you is built by NNEK based on your time horizon and financial goals. Simply answer a short questionnaire and you’ll get everything set up for you.
- Automated savings plans: Through Curvo’s app you can set up a monthly contribution from €50. That means that money is automatically invested for you in your portfolio. Put your savings on autopilot!
- Fractional shares: All the money you send towards your portfolio is fully invested by NNEK. No cash is left on the side.
- Sustainable investments: Your investments focus on one guiding principle: don’t invest in companies that are considered destructive to the planet. This means that sectors like non-renewable energy, vice products, weapons and controversial companies are all excluded.
- Project yourself into the future: Through Curvo you can see how much your portfolio is expected to be worth in the future. You can answer questions like “how will increasing my monthly contribution by €50, €100 or €200 affect my long-term savings?” to give a concrete idea for the “future you”.
Summary
In this article we highlighted the key differences between Directa and DEGIRO, two brokers accessible to Italians. Due to the fact that Directa charges high fees, you need to ask if it's worth it to invest through their app over the long-term. But cost is not the only factor to take in consideration when you’re putting your savings to work. For instance, you should also take into account the ease of use of the app and their help with taxes. The fact that Directa handles the taxes for you under the Administered Regime is a bonus in comparison to DEGIRO which is now based in Germany.