Keytrade Keyplan review: read this before you start

Pros and cons of Keyplan

Read on to get the full low-down of Keyplan.

The story of Keyplan

Keytrade was created in 1998 and was one of the first online brokers in Belgium. Their offer has developed considerably since then, and they now offer a full range of banking services. In 2005, Keytrade Bank was acquired by the Crelan Group (formerly Crédit Agricole) and is now part of the Crédit Mutuel Arkéa Group.

How Keyplan works

It's fairly simple. You choose an amount, the frequency of your investments (monthly, quarterly, semesterly, or yearly), and an investment portfolio. Your money will then be automatically invested for you in this portfolio. This approach follows two fundamental rules: diversification across multiple funds and regular investing, which collectively aims to minimise risks and maximise your returns over the long term.

Wherever you are, you keep track of your portfolio of your Keyplan directly on the Keytrade Bank app. Note that you can only open a Keyplan investment plan if you are already a Keytrade Bank customer.

How your money is invested with Keyplan

Keyplan offers 40 different funds you can invest in. The funds have been selected by Keytrade's "stock market experts" in line with their criteria: performance, risk, diversification (geographic and across sectors) and the quality of the fund manager.

You have two options to select your portfolio:

1. Invest in a pre-made portfolio
2. Build your own portfolio "à la carte"

3 pre-made portfolios

Keytrade has built 3 pre-made portfolios from the 40 funds: Cautious, Balanced, and Audacious.

Cautious

The Cautious portfolio is more suited for risk-averse investors, or those with a shorter investment horizon. It is composed of 30% stock funds and 70% bond funds:

The allocation above was determined on December 17, 2023. Check Keyplan's website for the latest composition.

Balanced

The Balanced portfolio gives more weight to stocks than in the Cautious portfolio. This means it will be more volatile, but you can expect a higher expected return:

The allocation above was determined on December 17, 2023. Check Keyplan's website for the latest composition.

Audacious

A portfolio made up of 100% stocks and the riskiest one on offer. It's best suited if you want to earn a higher expected return and you can take the higher risk:

The allocation above was determined on December 17, 2023. Check Keyplan's website for the latest composition.

Build your own portfolio "à la carte"

You don't need to invest in one of the 3 pre-made portfolios. You can also choose to build your own "à la carte" portfolio of funds.

Beware that this is not a straightforward process if you want to do it well. Navigating through 40 different funds and building the right portfolio that matches you and your goals, whilst taking into account diversification and tax considerations, is challenging. To help you, we've identified some of the criteria to look out for when choosing funds for your portfolio.

Criteria when choosing a fund

There are several things to look out for on the page of a Keyplan fund:

• The fund name
• Provider: The company that manages the fund.
• ISIN: ISIN stands for International Securities Identification Number, a code that uniquely identifies a fund. For example, you can Google the ISIN code to find more information about the fund.
• Fund type: If the fund invests in equities (a synonym for stocks), bonds, or a mix.
• Cap/Dis: Depending on what a fund does with dividends, it can be accumulating or distributing. Accumulating funds reinvest dividends, whilst distributing funds pay out the dividend to you. In Belgium, as dividends are taxed at 30%, accumulating funds are generally more tax-advantageous.
• Stock exchange tax: In Belgium, a transaction tax needs to be paid on every purchase and sale of a fund (the tax is also known as the TOB). The country of registration of the fund and the distribution of dividends affect the tax rate, which ranges between 0.12% and 1.32%.

We understand it can get confusing when there's so much information to consider! But the details are crucial to help you make a decision with your investments, especially when we're discussing your life savings.

Active funds underperform

The biggest issue with the funds in Keyplan's portfolios are made up of active funds where professional fund managers try to beat the market. They intentionally invest in the stocks that they think will do better than ours, and apply market timing to buy and sell at the right time. Unfortunately, this leads to worst investment returns most of the time. Data shows that active investing underperforms a passive approach based on index investing. The ESMA, the European regulator for the finance industry, found out that more than 75% of active funds underperform against their index benchmark. On top of that, the group of top 25% active funds changes constantly. There's a good chance that a top fund of the last 5 years won't be nearly as good over the next 5 years. So it's almost impossible to consistently pick outperforming active funds.

Index (or passive) investing takes the opposite approach. Rather than picking certain stocks that you think are going to be winners, you try to invest in all stocks at once. This way, you earn a return that corresponds to the average return of the whole stock market.

One of the main reasons behind the underperformance of active funds are the fees. As we will see in more detail below, the fees of the funds offered by Keyplan are an order of magnitude more expensive than an index-based ETF like IWDA. And these fees are directly taken out of your return.

Keyplan's fees

Now let's look at how much it costs to invest through Keyplan. They claim their service is free:

It's completely free of charge. There are no fees when you open a Keyplan, no management fees and you can also stop the investment plan for free.

 Is it actually the case, or is there more behind it?

Very expensive funds

The real costs of investing in Keyplan are hidden in the funds selected by Keyplan. Fund managers charge a fee for managing their funds. The total cost of a fund is indicated by the total expense ratio (TER). Index-based ETFs usually have a TER of around 0.20%. But Keyplan's funds, which are all actively managed, are a lot more expensive. For example, the TER of the funds in their Balanced portfolio vary between 1.51% and 2.05%. These fees are directly taken from your return.

A high TER usually means that the fund is actively managed, which it mainly does in an attempt to beat the market. It requires fund managers, analysts and other specialists to do the research and make investment decisions. As the fund uses more resources than an index-based fund, the fund requests a higher management fee from the investor.. In reality, this means that the fund will be more expensive for you to purchase, and as a result generate lower returns.

Fund costs for the Keyplan portfolios

You're probably wondering how much the three pre-made portfolios actually cost in practice. We compared the cost of each portfolio with an equivalent portfolio of ETFs:

For the ETFs, we've chosen two ETFs popular for Belgian investors:

• A stock ETF: iShares Core MSCI World (IE00B4L5Y983) with a total expense ratio of 0.20% per year.
• A bond ETF: SPDR Bloomberg Euro Government Bond (IE00BMYHQM42) with a cost of 0.10% per year.

The difference in costs between the Keytrade portfolios and an equivalent portfolio of ETFs is quite staggering. The Audacious portfolio has a cost of 2.21% per year, but the ETF portfolio has fees of just 0.20%. That's 11 times lower!

Read more about investing in ETFs.

Some funds have a performance fee

Unfortunately for you, some of the funds offered by Keyplan charge a performance fee on top of the ongoing charges. You pay this fee when the fund outperforms its benchmark and they're meant to align the interests of fund managers and yours to achieve superior returns. However, the cost is not symmetric: you don't earn a "reverse" performance fee if the fund underperforms. So it's an additional cost that you have to bear as an investor, and ranges from 0.09% to 1.33% per year for the Keyplan funds.

Keytrade makes money through a distribution fee, a potential conflict of interest

The ongoing charges and performance fee charged by the funds go to the fund providers, not Keytrade. Instead, Keytrade makes money for Keyplan through a distribution fee. Fund providers pay Keytrade this fee when Keyplan customers invest in one of their funds. So the distribution fee is like a commission.

For instance, Keytrade earns a 0.75% distribution fee on the amount invested whenever a Keyplan customer invests in the Schroder International Selection Fund Emerging Asia A fund.

At first sight, there's nothing wrong with Keytrade getting money from the fund providers. This is how they can offer Keyplan for "free". But it does bring up a potential conflict of interest. As a Keyplan customer, you want the highest return on your investment. Keytrade wants that too, but as a for-profit company they also want to make more money. This poses the question whether Keytrade select their funds based on their performance, or how much they pay in distribution fees. Also, did they compose the pre-made portfolios out of the best funds, or those that pay them the highest distribution fee? As a customer, it's important to take into account these misaligned incentives.

Beware of the dividend tax with distributing stock funds

In Belgium, any dividend you perceive is taxed at 30%. Accumulating funds, which directly reinvest dividends, are a way around this tax. Unless you want to earn an income from your investments, it's therefore more tax-advantageous to invest in accumulating funds when the fund invests in stocks.

However, some of Keyplan's funds, like Fidelity Funds World Fund, invest mostly in stocks yet are distributing. This means you'll have to pay the dividend tax for them. So if you do à la carte, be careful in your choice of funds to avoid paying too many taxes.

Convenience of Keyplan

As Keyplan is an investment service offered by Keytrade Bank, a Belgian bank, it covers a lot of the heavy lifting for you as an investor:

TOB ("beurstaks" / "taxe boursière")

There’s a tax on the transaction every time you buy or sell a security in Belgium. The rules concerning the tax rate are complicated, also for ETFs. Depending on the characteristics of the fund, the transaction tax varies between 0.12% and 1.32%.

Fortunately, Keyplan handles the payment and declaration of the TOB for you.

Dividend tax

There’s a 30% tax on dividends that you perceive through shares that you hold. This tax is applicable to individual stocks but also to distributing funds. As we've seen above, there are a number of funds in the Keyplan which have distributing funds.

Keyplan automatically withholds and declare the dividend tax for you.

Reynders tax

For ETFs that consist of at least 10% bonds, there is a 30% tax on the profits made when selling. For example, if you bought a bond ETF at €100 and end up selling it later for €130, your net profit will only be €21. The other €9 will go to the Belgian state through this tax.

Keyplan handles the Reynders tax for you so you don't have to worry.

Does Keyplan require declaring the account to the NBB?

No need, as they are based in Belgium and part of Keytrade Bank.

Automated savings plans    

Yes. You can automate your investment plan using Keyplan. You can choose how often you decide to invest in an automated manner. It can be done per month, three months, six months or annually.

Customer support

They have a phone line you can call from Monday to Friday between 9.00 and 22.00 with any questions or queries. They also have an option to send an email.

We found them easy to get in touch with, but they take a long time to reply. You receive an automated response saying they will get back to you within two weeks.

They have an automated bot for the FAQ which we found unhelpful. It didn't get back to our requests or point us in the right direction to get an answer.

Fractional shares

Yes, all your money is invested when you invest with Keyplan. When you have distributing funds in your portfolio, dividends are reinvested automatically for you during the next update in your Keyplan (you'll still need to pay the dividend tax on them though). That's a pretty neat feature as it means all your money is working for you. There's no cash lying idle on the side.

Create an account on the web but not mobile

Besides a web platform, Keytrade also offers a mobile app for both iOS and Android. However, you can only create a new account on a computer.

Ease of use: 3/5

As it offers an automated way of investing your money and uses itsme, you can create a Keyplan fairly quickly. However, if you choose to build your portfolio "à la carte", you have to decide the asset allocation across 40 different funds. This can be daunting for first-time investors.

Also, we found their claim of being completely free misleading, as the costs of the underlying funds are orders of magnitude higher than equivalent investments through ETFs.

Setting up an account

Let's dig into the details of setting up your Keyplan account for the first time.

Keyplan uses itsme

You can create a new Keytrade account using itsme. You must create a Keytrade account in order to set up a Keyplan. Using itsme speeds up the process of creating an account, as the old way was very slow. It even says that manual verification can take between 5 to 10 working days:

You'll have to fill in a short "knowledge and experience" test before you can start investing. It's fairly standard and only takes a few minutes to complete.

Start investing from €25

Keyplan is definitely an accessible way to put your money to work as you can invest from €25.

Does Keyplan offer children accounts?

One important benefit of using Keyplan is that they offer children accounts. You have two choices:

1. Open a Keyplan in the name of your child: You open the Keyplan and when your child reaches 18 years old, they get full control of the account.
2. Open a Keyplan in your name with the child as a beneficiary: You open the Keyplan and essentially keep control of the investment plan and the funds belong to you. You can then choose to pass it on when you wish.

Does Keyplan offer joint accounts?

You can set up joint accounts, which is handy for couples looking to invest together.

Can I have multiple Keyplan accounts?

Yes. As long as you're a Keytrade customer, you can open as many Keyplan accounts as you like which means you can have multiple portfolios matching different financial goals.

Safety of Keyplan

As we’re dealing with our long-term savings, safety and trust is vital. For that, we have to look at the safety of Keytrade Bank.

Who is the regulator?

Keytrade is a regulated entity in Belgium. Essentially this means that the FSMA and the Belgian National Bank oversee them.

Have they had any issues with the regulator?

Based on our research, we can't find any information that Keytrade has had any issues with any regulator.

How much of your assets are protected by the investor protection scheme?

Even though they are regulated by the Belgian regulator (FSMA), Keytrade is owned by the French Arkéa. In France, the investor protection scheme protects your assets up to €70,000 through the Fonds de Garantie des Dépôts et de Résolution (FGDR). This is used as a last resort against fraud or embezzlement.

Does Keytrade Bank do securities lending?

They do not do securities lending. This means you don't risk certain types of counterparty risk.

A more transparent alternative: Curvo

We created Curvo to provide a better option for Belgian investors.

Better return through index investing

In the past, all investing was active like you have with a Keyplan. In active investing, you intentionally pick certain stocks to invest in. You hope that these stocks are undervalued when you buy them, and that you can sell them with a profit later. Index investing takes the opposite approach. Rather than picking certain stocks that you think are going to be  winners, you try to invest in all stocks at once. This way, you earn a return that corresponds to the average return of the whole stock market. And it turns out that index investing usually beats active investing.

When index investing, you invest in a type of fund called an index fund. Each index fund tracks a specific index, which is a collection of stocks with strict rules on which stocks are included and how much of each company the index contains. An index fund invests in the companies dictated by the rules of the index.

The most famous index is the S&P 500, which contains the 500 biggest American companies. Large companies such as Apple, Google or Amazon are represented in the S&P 500. The main index in Europe is the EURO STOXX 50, and the Belgian BEL 20 consists of the 20 largest companies in the country.

Ever since the first index fund was created in 1976, index investing has proven to be a great way to invest. By effectively becoming part owner of thousands of stocks across the world, index investing lets anyone earn a dividend off of the growth of the world economy. The graph below shows the growth of the S&P 500 index since 1992. A €10,000 investment in 1992 would have resulted in over €220,000 by the end of 2022, or an average 10.6% return per year!

No danger of making bad decisions like with à la carte

Rather than having to pick through the 40 different funds on offer through Keyplan in order to build your portfolio, through Curvo 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. They're also tax optimised so you don't have to worry about the finer details, and they're managed by NNEK, a Dutch investment firm under supervision of the regulator in the Netherlands (AFM).

Pay less, and in a transparent way

Keyplan is expensive. As we've shown above, it's not entirely free to use as there are high costs charged by the underlying fund providers. We built Curvo as an easier option for Belgian investors to put their money to work in low-cost index funds. Whereas the Keyplan portfolios have costs between 1.47% and 2.21% per year, the portfolios offered through the Curvo app have costs between 0.15% and 0.25% per year. You still need to pay a fee between 0.6% and 1%, but even with this fee, investing through Curvo remains significantly cheaper than Keytrade.

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”.

Learn more about investing through Curvo.

Summary

Keyplan is a convenient service for those who want to invest in an automated way. It's also very accessible as you can start from €25. And Keytrade is a solid financial institution with a good reputation.

Having said that, while Keytrade claims Keyplan is free, the real costs are in the funds they selected, varying between 1.51% and 2.05% for their Balanced portfolio. Some funds even have a performance fee. All these funds are an order of magnitude more expensive than an index-based ETF.

The real worry though is the potential conflict of interest due to the distribution fee, the commission that Keytrade earns from fund providers. It incentivises Keytrade to select the funds that pay them the highest distribution fee, rather than those that are the best for you as a customer.