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 eToro and Saxo Bank, two brokers available to European 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 table shows an overview of how eToro compares to Saxo Bank for different criteria. Read on to get the full details!
Story of eToro 🇮🇱
eToro was founded in 2007 in Tel Aviv. They've grown to 30 million users around the world by giving their customers easy access the stock market. Do note that there's "only" 2.6 million users with money in their account so the number is quite inflated. eToro has been at the forefront of the movement to make investing more "mainstream", as shown through their adverts featuring Alec Baldwin. One of the unique features of eToro is its CopyTrader function, which allows users to automatically replicate the trades of successful traders on the platform. This feature is particularly useful for novice investors who may not have the experience or knowledge to make their own investment decisions. Additionally, eToro offers a social feed where you can interact with your friends, share ideas, and discuss investment strategies. They were one of the first brokers to pioneer "social investing".
Fees for ETFs
eToro has a limited selection in comparison with other brokers. They only offer 263 ETFs to purchase. Buying €1,000 of the popular IWDA ETF will cost €0 in transaction fees. However, keep note of the currency exchange fee you'll be paying. Note that you can't actually purchase IWDA but you get the same fund with an alternative ticker SWDA. Even though you're most likely going to use eToro from the Belgium (or in the EU) if you're reading this, their entire app is in USD. This is where eToro makes the bulk of their revenue from! The conversions between € and USD are core to their business model. For example, if you deposit via a bank transfer, you'll pay 0.5% exchange rate costs. If you deposit via Paypal or Sofort, you'll end up paying a 1.5% exchange rate cost.
eToro allows setting up recurring deposits, but investments must be made manually. They offer the ability to purchase fractional shares, facilitating euro-cost averaging strategies, particularly beneficial for investing smaller amounts periodically. However, eToro requires users to handle their own tax obligations irrespective of which European country you're using the app from. For example, in Italy, it's a declarative regime. For Belgian investors, you have to handle the Belgian transaction tax yourself, dividend tax, and Reynders tax on ETF profits, as well as declaring the account to the National Bank of Belgium annually, as eToro does not provide assistance in these areas.
Setting up an account
Setting up an eToro account is fast and user-friendly, requiring only an email for initial access, with full account creation necessitating ID and proof of address, typically approved within a few hours. eToro offers the convenience of signing up through both web and mobile platforms including the option to use Facebook or Google for registration. However, the app's design feels somewhat outdated, and its interface can be overwhelming with information, especially for buy-and-hold ETF investors. eToro does not offer children or joint accounts, though joint configurations for deposits are possible.
eToro is regulated by multiple entities including the Cyprus Securities Exchange Commission (CySEC), the FCA in the UK, and the SEC in the United States, with its headquarters in Israel. They have faced regulatory issues, including being banned in India, fined €1.3 million in Italy for misleading advertising, and fined in Canada for operating without registration. While eToro's EU operations based in Cyprus offer €20,000 protection under the European investor protection scheme, cash is not protected by the €100,000 deposit guarantee scheme. Additionally, eToro participates in securities lending and engages in payment for order flow (PFOF) in the United States, with unclear practices for European clients.
The full review
We wrote an extensive review of eToro if you wish to dig deeper on their offer.
Story of Saxo Bank 🇩🇰
The story of Saxo begins with its founding in Copenhagen in 1992. The company was established with a vision to make global financial markets more accessible to a wide audience. By 1998, Saxo Group had launched one of the first online trading platforms in Europe, offering professional-grade tools and easy access to global financial markets for anyone interested in investing. They serve over 1m customers and have over €100bn under management. In 2018, they purchased the popular online broker BinckBank for €428m. All BinckBank customers were automatically switched over to the Saxo Bank platform for trading.
Fees for ETFs
Saxo Bank is one of the most expensive brokers in Europe. To buy €1,000 worth of IWDA, the cost is €9.75 for the transaction fee alone.
Saxo Bank, catering to experienced traders, supports a wide array of complex order types but does not offer automated savings plans or fractional shares making regular investing less practical due to high fees. Depending on where you're registered in Europe, Saxo Bank assists investors. For example, in Belgium (🇧🇪), it helps with transaction taxes, dividend taxes, and the Reynders tax on ETF profits, and due to its direct presence in Belgium, customers don't need to declare their accounts to the Belgian National Bank.
Setting up an account
Setting up an account with Saxo Bank is streamlined though approval may take a few days. While Saxo Bank does not provide children accounts, it does offer the option to set up joint accounts.
Saxo Bank, with its primary regulator being the Danish Financial Supervisory Authority (DFSA), continues to operate under a Dutch banking license after acquiring BinckBank. Saxo Bank participates in securities lending with an opt-in policy for transparency, and does not engage in payment for order flow (PFOF).
The full review
Learn more about the pros and cons of investing through Saxo Bank in our 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 eToro or Saxo Bank, 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.
- No TOB 🇧🇪 : Significant savings as the portfolios aren’t liable for the Belgian transaction tax (or "TOB"). This saves you between 0.12% and 1.32% for every time you buy or sell!
- 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”.
In this article we highlighted the key differences between eToro and Saxo Bank, two brokers accessible to Europeans. Due to the fact that Saxo Bank charges higher 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, eToro has a limited number of ETFs and trades solely in US dollars with hidden fees, it's not a brokerage platform we can recommend. We hope our comparison will help you make a decision in choosing the right broker for your investments.
Questions you may have
What broker is better than eToro?
The answer is: it depends on your expectations! Brokers vary in terms of convenience, safety and price. To help you make a decision, we reviewed the top brokers for Belgian investors.
What are the downsides to eToro?
There are two major drawbacks with using eToro:
- eToro is popular for trading CFDs. A CFD, or contract for difference, is a risky type of derivative that allows you to speculate on the price movements of underlying stocks or currencies, without actually owning the underlying asset. Instead, a CFD is a contract between you and eToro, in which you agree to exchange the difference in the price of the underlying asset between the opening and closing of the contract. One of the main risks is their high leverage, which means that you can control a large position with a relatively small amount of capital. While leverage can amplify gains, it can also amplify losses, and investors can quickly lose more than their initial investment. Additionally, CFDs can be complex and difficult to understand, particularly if you're new to investing. Before trading in CFDs, you should carefully consider the terms of the CFD contract, including fees, margin requirements, and the potential risks and rewards. Because of these reasons, most investors lose money when trading CFDs. As eToro says themselves on their website, 76% of eToro customers lose money when trading CFDs.
- Even though you're most likely going to use eToro from the EU if you're reading this, their entire app is in USD. This is where eToro makes the bulk of their revenue from! The conversions between € and USD seems core to their business model. For example, if you deposit via a bank transfer, you'll pay 0.5% exchange rate costs. If you deposit via Paypal or Sofort, you'll end up paying a 1.5% exchange rate cost.