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 Revolut, a neo-bank based in Lithuania, which offers brokerage services to buy ETFs. 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 Revolut is a right broker for you to invest your savings, or if another more specialised or suited broker suits you better.
Pros and cons of Revolut for ETF investing
The story of Revolut
Revolut was founded in 2015 by Nikolay Storonsky and Vlad Yatsenko. Initially focused on providing multi-currency cards, Revolut quickly expanded its services to include banking, cryptocurrency, and trading. With over 15 million users worldwide, Revolut has become a significant player in the fintech space.
Revolut offers a range of investment options, including stocks, cryptocurrencies, and commodities. Recently, they have expanded to include ETFs. The app is accessible from most EU countries, including Belgium and Italy. For this review, we are going to focus solely on ETF investing. The pricing differs if you want to purchase individual stocks and crypto so double-check on Revolut's website for the most up-to date pricing.
Fees
Fee structure
Revolut's fee structure is straightforward but varies depending on the subscription plan you choose. They currently have five plans:
To add a bit more to the confusion, you can also purchase a "Trading Pro" add-on which costs €15/month on any of the plans above. It also means you are entitled to 10 commission-free trades and then you have a reduced commission per transaction of 0.12%.
For trades exceeding the monthly limit, Revolut charges a 0.25% fee per trade, with a minimum fee of €1. This fee is reduced to 0.12% if you purchase an "Ultra" subscription or the "Trading Pro" add-on.
Revolut makes money on currency conversion
Even though you're most likely going to use Revolut from the EU if you're reading this and buy ETFs in EUR, you can also make trades in USD. You will have to convert the currency in your primary Revolut account before purchasing it. When applicable, the fees collected will be charged on the sell orders and withheld from your sales proceeds.
Fees for ETFs
Let's focus on ETFs, which are gaining in popularity (and for good reasons). Revolut has a very limited selection in comparison with other brokers. They only offer around 150 ETFs to purchase. Buying €1,000 of the popular IWDA ETF will cost €0 in transaction fees. However, keep note of the potential monthly subscription or currency exchange fee you'll be paying. The pricing is also dependent if it's your first trade of the month too.
To get a full breakdown of the costs, you can download an "ex-ante" document directly from Revolut's website where you can change the fields yourself and see the associated fees for ETF investing.
Convenience of Revolut
Automated savings plans
You can set up recurring trades using Revolut and through their app. You have to figure out your choice of funds yourself before automating your trades.
Fractional shares
A popular investment strategy is euro-cost averaging, where you invest periodically instead of investing large lump sums in one go. You invest at fixed times, for instance every month, regardless of how the markets are performing. Most people are paid monthly, so it makes sense for their investments to follow the same pattern. A big benefit of using Revolut is that you're able to buy fractions of shares. This means you can buy parts of an expensive ETF or stock. For example, at the time of writing, Microsoft's stock price is $430 meaning you could invest €100 every month into Microsoft stock and build your wealth that way. This is useful if you have lower amounts to invest periodically. You can invest from €1 through Revolut.
Customer support
Revolut's customer support isn't known to be super helpful and they automate a lot of their interactions with customers. If you have any questions you can send them via email. If you're a registered user, you can also use a chat to speak with them directly. There is no way to phone Revolut.
🇮🇹 Declaratory regime
As an Italian investor, you'll have to handle the taxes yourself. You'll have to manually take that data 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 Revolut puts the burden on 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 ETF, the transaction tax varies between 0.12% and 1.32%.
Unfortunately Revolut does not help you with these tasks. You have to make the calculations yourself and then declare and pay it. Failure to do so may result in a hefty fine from the taxman.
🇧🇪 Dividend tax
Revolut does not help you with the dividend tax. In Belgium, any dividend you perceive is taxed at 30%. Accumulating funds, which directly reinvest dividends, are a way around this tax. On the other hand, distributing funds distribute their dividends, which means they're taxable.
Unfortunately, Revolut doesn't withhold this tax for you. So be careful in your choice of funds if you want to avoid paying the dividend tax or even having to declaring it every year in your tax form.
🇧🇪 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.
Unfortunately Revolut doesn't withhold this tax for you. You will have to calculate and declare it yourself.
🇧🇪 Does Revolut require declaring the account to the NBB?
Yes, as Revolut is a foreign account based in Lithuania so you have to declare to the National Bank of Belgium as well as on your tax returns every year.
Setting up an account
Let's dig into the details of setting up your Revolut account for the first-time.
Fast to open an account
It's one of the easiest apps to get an account set up. Revolut has a very modern and sleek process to create an account. Once you have a Revolut bank account set up, you can easily access the "Trading" feature of the app. Approval took us less than 10 minutes when we set an account up.
Create an account on mobile
You have to download Revolut's app to create an account. Their app has one of the smoothest processes we've experienced in creating an account. It only takes a few minutes to get registered and complete all the necessary information required to open an account.
Ease of use: 3/5
Revolut is a lot more than just a trading app. As it's a full-fledged neo-bank app, it has such a large variety of options. Revolut shows many details that aren't very relevant to most investors, especially for buy-and-hold index investors. This means the mobile experience can get quite complicated and fairly difficult to find the information you need to make an investment decision. It also has limited ETF options. The design is very nice though and the app is well built. You can also use Revolut on your desk or laptop. As it's not a standalone brokerage app, we've rated it a 3 out of 5!
You can't invest with a junior account
Revolut offers a feature called "Revolut Junior" which is designed specifically for children and teenagers aged 6 to 17. To set up a Revolut Junior account, you'll need to have a Revolut account yourself. Note that you can't invest with a "Revolut Junior" account.
No joint accounts
Revolut does not offer traditional joint accounts.
You can't invest with a business account
You can create a business account on Revolut but these accounts do not have direct access to trading features like those available for personal accounts.
Is Revolut safe?
Who is the regulator?
Revolut is regulated by the Bank of Lithuania (Lietuvos Bankas) for its European operations. Revolut runs most of it's operations from Lithuania. The move there from the UK was part of Revolut's strategy to secure an e-money license within the EU after Brexit to ensure continued operations across Europe.
Have they had any issues with the regulator?
The Bank of Lithuania supervises Revolut.
However, Revolut has had numerous issues with regulators:
- Compliance concerns. In 2019, the FCA scrutinized Revolut's compliance processes, particularly around anti-money laundering (AML) and sanctions screening procedures. Revolut temporarily switched off an automated system designed to stop money laundering and replaced it with a manual one.
- Auditing concerns. In 2021, Revolut's auditor BDO raised concerns about the company's compliance with regulations and internal controls, which were flagged in Revolut's annual report.
- Regulatory issues. In 2022, Revolut were fined a total of €200,000 by the Bank of Lithuania for lack of control procedures in terms of anti-money laundering and terrorist financing.
These are considerations to take in mind if you're thinking about putting your savings through an app like Revolut.
How much of your assets are protected by the investor protection scheme?
Your assets are segregated. They are also protected by the €22,000 investor protection scheme as their EU operations are based in Lithuania.
Is your cash protected by the deposit guarantee scheme?
Yes, your cash is protected by the €100,000 deposit guarantee scheme.
Does Revolut do securities lending?
No. Revolut does not lend out your assets.
Does Revolut do payment for order flow?
No. It doesn't appear that Revolut engages in payment for order flow (PFOF). PFOF is an important source of revenue 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. However, considering Revolut's core business is banking, it's no surprise they don't make money through this means.
Revolut vs other brokers
We have also compared Revolut with other brokers if you wish to dig deeper:
- Revolut vs Trade Republic
- We've written a guide for Belgian investors on the best broker in Belgium
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 an app like Revolut, 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.
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 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. 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
Revolut provides a user-friendly app and cost-effective platform for investing in ETFs. While it offers numerous advantages, such as fractional shares, automated savings plans, and no connectivity fees, it's essential to consider the tax implications and self-declaration requirements for Belgian and Italian investors. There's also a real limitation for the choice of ETFs on offer through their app. It may be better to use a dedicated broker for your investments.