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How securities account work? Which pitfalls to consider? How to change an account provide?

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How does a securities account work?

The securities account manages stocks, bonds, ETFs or funds – but no liquidity. Even so, the money you use to buy your securities has to come from somewhere. Just like the money you owe on selling stocks or bonds has to go somewhere. That is why a so-called reference account (or clearing account) is essential for every securities account.

Many branch banks require that not only the custody account but also the reference account be kept with you. As a rule, online banks do not issue this requirement. That means: You can set up your securities account with a cheap internet broker, but at the same time leave your current account with your house bank and enter this as a reference account.

Alternatively, many internet banks also offer to open a deposit account in addition to the securities account, which then serves as a reference account. The advantage here: In contrast to many current accounts, call money accounts usually offer interest. So if you temporarily reduce your portfolio volume, the resulting liquidity will earn interest on the reference account.

Caution: If you want to park larger amounts of money in the reference account, make sure that the provider is subject to the statutory German deposit insurance – only then amounts of up to 100,000 euros are absolutely safe, even in the event of insolvency. As far as the depot itself is concerned, you don’t have to worry about the provider’s bankruptcy. The broker keeps your stocks, bonds or funds in custody – but they do not belong to him. The securities do not flow into the bankruptcy estate but remain in your possession as so-called special assets.

What pitfalls do I have to consider?

What pitfalls do I have to consider?

You now know how to open and manage a securities account. Nevertheless, pitfalls are lurking in everyday use of the securities account. Here are the essential tips on what to consider:

  • Don’t act too often. Otherwise, the order fees cost unnecessarily high returns even with the cheap online providers. The average custodian customer at a branch bank places half a dozen orders a year, statistics show. Depot customers with online brokers trade around twice as often on average. The number of your buy and sell orders should normally not go significantly higher. For so-called heavy traders who place several hundred orders a year, only a few providers are really suitable, for example, Flatex, Onvista or web trading.
  • Pay attention to the different pricing models for the order fees. Usually, the cost is based on the size of the order – the higher the buy or sell volume, the higher the fee. Most online banks, however, set upper limits. On the other hand, almost all providers have minimum fees, which at some branch banks are 25 euros and more per order. Buying shares for just a few hundred euros then makes no sense because the investor already loses several percent of the return at the moment of purchase. As a rule of thumb, the fee should be in no case amount to more than one percent of the purchase volume. Since an order costs at least four to five euros even with extremely cheap providers, you should never place orders of less than 400 to 500 euros.
  • Check any third-party charges. As described above, the annual custody account fees and the order fees are the main cost items – especially since opening the custody account is free, at least with most online providers. However, there are also so-called third-party fees for brokers and the stock exchange. Most providers pass these fees on to the customer almost one-to-one. Compared to the order fees, the third-party fees are low, especially for larger orders. If you still want to save the money, you should order at over-the-counter trading venues such as Tradegate. But be careful: A spread applies here – i.e. a margin – between the buying and selling price. If this spread is too large (because too little is being traded on the respective trading venue), the order may end up being more expensive than if you had paid the external fees.
  • If possible, trade during regular stock exchange opening times. Then the liquidity in the market is greatest – the spreads are correspondingly low. If you are trading in American stocks, do so in the evening.
  • Be careful – not every offer does what it says on the tin. Online brokers repeatedly advertise for customers with (supposed) special conditions. But: Take your time to see whether one of the offers fits your needs. An example: Some providers advertise with a contingent of free orders at the start. If you want to build up a securities portfolio anyway and then leave it aside for as long as possible, then this offer is exactly the right one for you.
  • Check your portfolio regularly. (at least once a year) – even if your investments are long-term. You have access to your online depot at any time via the Internet and, with many providers, also on the move. A note: the portfolio overview often only shows the price development of the paper – but not the dividends and other distributions that land on your reference account. You have to calculate your “total return” (i.e. price gains plus distributions minus fees) yourself.
  • Enter the desired power of disposal. If you are married, you and your spouse can share a securities account. As with the common checking account, there is the and variant and the or variant. With the OR account, each spouse can dispose of the deposit (you or your partner), with the AND account you have joint power of disposal (you and your partner). You can also open a deposit for your child or grandchildren.

How do I change my account provider?

You already have a securities account – but are dissatisfied with your old bank, for example, because the fees are too high for you? Then simply switch to a new provider. Such a depot transfer takes a little effort, but is worthwhile and is usually even free.

How to proceed:

  • Search – as described above – the right provider for you.
  • When you open an account, you inform your new bank that you already have a securities account. You give the bank a power of attorney to collect your securities from your previous securities account. Your new bank will take care of the formalities associated with the transfer of the portfolio.
  • If you have mutual funds in your portfolio, you may have what are known as fragments. These arise, for example, if you have bought fund units for a fixed amount using a savings plan – and the amount was not always enough for a whole unit, so that you only bought a “fragment” of a fund unit. These fragments are not transferred. Instruct your old bank to return the remaining custody accounts to the fund company. The proceeds are yours; processing is free.
  • Terminate your now-empty old deposit with your previous bank. Otherwise, annual basic fees may still be due.
  • Your tax data will be transmitted automatically when you change provider. If you suffered losses with your old custody account, your new bank could offset these losses against future profits – so you save withholding tax. By the way: Securities that were bought before the withholding tax was introduced will continue to enjoy grandfathering after the securities account has been changed.

INFO: While the opening of the deposit account only takes a few days, the transfer of the deposit account can take a few weeks. You cannot sell any securities during this time.

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