Choosing a broker is an important step when starting to invest. There are many different options available, so picking the right one for you is challenging. We take a closer look at MeDirect, a Belgian bank that offers investment services. We'll look at the pros and cons, the fees, convenience of setting up an account and safety. By the end, you'll be able to decide if MeDirect is the right broker for you to invest your savings, or if another broker suits you better.
Pros and cons of MeDirect
Read on to get the full low-down of MeDirect.
The story of MeDirect
MeDirect was originally started back in 2004 and operated under the name "Mediterrean Bank". The current form of MeDirect was created in 2013 and initially offered a new type of savings account specifically for Belgians.
They have around 80,000 clients and more than 3 billion euros under management. You can do basic investing through ETFs, funds and bonds using their brokerage service.
Fees
Fee structure
It's free to create an account. Also, there's no membership fee. So in most cases, you'll only pay a transaction fee for whenever you buy or sell something except for mutual funds but we'll get into that later on.
MeDirect charges higher transaction fees for higher transaction amounts, and different fees per exchange. You pay 0.20% of the transaction, with a minimum fee depending on the exchange. The cheapest exchange is Euronext Brussels, with a minimum fee of €7. This fee structure is fairly standard for a broker. However, there are on the pricier side among their peers, and similar to Keytrade. For instance, buying anything on the German XETRA exchange will cost at least €15. This makes MeDirect unattractive when investing smaller amounts.
Examples of minimum transaction fees for stocks and ETFs:
Note that if you're buying bonds through MeDirect, it's even more expensive. You'll be paying at least €15 for any euro-denominated bonds.
Fees for ETFs
If we focus on ETFs, which are gaining in popularity (and for good reasons). Buying €1,000 of the popular IWDA ETF will cost €10 when purchasing on the Euronext Amsterdam exchange. As you pay this fee for every purchase, it will compound to a lot of money and missed returns on the long term. As you can see below, MeDirect is the second most expensive broker:
It's expensive to move investments elsewhere
Watch out as the price can get out of hand if you want to move away from MeDirect to another broker. Transfer of assets from MeDirect is €35 per share for stocks and bonds. And for funds it comes to €150 per share (which is enormous and the most expensive we've found in Belgium).
MeDirect gets commission from fund managers
MeDirect doesn't charge transaction fees when you buy or sell mutual funds. However, note that as they are distributing them, they receive commissions from the fund managers on the management fees they charge. It's not super transparent and this usually results in a more expensive total expense ratio (also known as TER). It's essentially the price the fund charges you to manage your money and it's deducted from your fund value.
Convenience of MeDirect
As MeDirect is a Belgian broker, they handle a lot of the heavy lifting for Belgian investors.
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 ETF, the transaction tax varies between 0.12% and 1.32%.
Fortunately, MeDirect 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 MeDirect is registered in Belgium, they automatically withhold 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.
Again, MeDirect handles the Reynders tax for you so you don't have to worry.
Does MeDirect require declaring the account to the Belgian National Bank?
No need, as they are based in Belgium and your account is held there.
Automated savings plans
MeDirect does not have automated savings plans on their brokerage platform.
However, they do offer an automated investment option called MeManaged. The minimum investment amount is €5,000 to open an account and you need to contribute a minimum of €100 a month in order to set up an automated savings plan.
Customer support
MeDirect aren't known as the most customer centric company and this is reflected in the fact that there isn't a live chat to ask questions directly. You can find all the usual support mechanisms though, like email and phone.
Fractional shares
Like many brokers in Belgium, MeDirect does not offer fractional shares. You're forced to purchase whole units of shares. Combined with the high fees, it becomes very impractical to invest on a monthly basis when using a broker like MeDirect. You almost have to resort to consolidating your monthly investments into large and infrequent contributions, like every six months.
Setting up an account
Let's dig into the details of setting up your MeDirect account for the first-time.
MeDirect uses itsme
You can create a new MeDirect account using itsme. This speeds up the process of creating an account. Otherwise you have to fill in more forms manually as well as get a copy of your ID card out. You'll also have to take selfies with your mobile phone even if you start creating the account on your computer.
You can open an account on the web but not on mobile
You can only create your account on the web but you'll need your mobile to set it up too.
Ease of use: 3/5
MeDirect went through a redesign of their experience on the web and on mobile. The new branding has made things clearer to understand and find. However, it's still a trading app so MeDirect shows many details that aren't very relevant to most investors, especially for buy-and-hold index investors. This makes the mobile experience can get quite clunky and fairly difficult to find the information you need to make an investment decision. However we are impressed with some of the limited investment options in comparison to other providers. Thanks to the new design which is fresh, we've rated it a 3 out of 5!
You can create joint accounts
You can create joint accounts on MeDirect, which is a benefit compared to some other brokers.
You can't create children accounts
However you're unable to set up accounts for your children. One workaround is to create multiple portfolios but that will be in your name.
Is MeDirect safe?
As we’re dealing with our long-term savings, safety and trust is vital.
Who is the regulator?
MeDirect is a regulated entity in Belgium. Essentially this means that the FSMA oversees them.
Have they had any issues with the regulator?
Based on our research, we can't find any information that MeDirect has had any issues with any regulator.
How much of your assets are protected by the investor protection scheme?
Assets on your MeDirect account are protected by the European investor protection scheme up to €20,000. Note that your investments are held in segregated investment accounts with custodians. Such accounts are held in the name of MeDirect as nominee for you as a client. As a result, no matter what happens to MeDirect, all investments will remain on these segregated accounts which means you're protected from bankruptcy.
Is your cash protected by the deposit guarantee scheme?
Yes, your cash on MeDirect is protected up to €100,000 by the Belgian Deposit guarantee scheme.
Does MeDirect do securities lending?
They do not do securities lending. This means you don't risk certain types of counterparty risk.
Does MeDirect do payment for order flow?
They do not do payment for order flow. PFOF is a notable source of income for many new brokers, including Trade Republic. This practice involves routing your orders to certain market makers, who then pay the broker for the right of executing these orders. PFOF can work at your detriment, as brokers may prioritise payment over executing the best possible trade for you.
MeDirect vs other brokers
All brokers offer more or less the same service. So for most investors, the broker fees and handling of taxes have become the most important criteria to make a choice. The table below shows the list of brokers for buying €500 of the IWDA ETF:
We have also compared MeDirect with other brokers if you want to dig deeper:
The easier way: Curvo
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 a broker like MeDirect, 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”.
Learn more on how it compares to investing through a broker.
Summary
MeDirect has established itself as steady option for Belgians, offering a comprehensive range of services from online brokerage to banking. Their high savings rate makes it stand out from the crowd as well as their slick brand. However when it comes to the brokerage, it's a convenient option, especially as it handles all the taxes and administration for you. However, its most important drawback is that it's expensive compared to other brokers. The fees add up and negatively impact your returns, especially if you're trying to invest on a monthly basis and if you choose a managed plan offered by MeDirect, it's quite expensive.
Questions you may have
Is MeDirect a good bank?
Yes. It started as a newcomer bank and has a good reputation in the industry. They offer some of the most competitive interest rates for saving accounts for Belgians.
Is MeDirect Belgian?
Yes and no. As a bank incorporated under Belgian law, MeDirect is supervised by the FSMA, the National Bank of Belgium and the European Central Bank. Furthermore, MeDirect is affiliated to the Belgian deposit guarantee scheme, so your deposits with the bank are covered up to €100,000 per person. However, it's owned by MeDirect Bank Malta and headquartered in Malta.