Open a Custody Account: How does the saver become an investor? If you are into long-term wealth accumulation, there is no getting around securities. However, you cannot invest in stocks, bonds, ETFs or investment funds from your current account – only with a so-called securities account. You use this depot to handle all purchases and sales. It also serves as a depository for your securities.
You can open a custody account either with a branch bank or with a so-called online broker. The branch bank offers personal customer advice. This service is recommended if you feel unsure about investing. The disadvantage: Depots with branch banks are usually much more expensive than with online banks. If you feel competent enough to make your investment decisions yourself, so you are only interested in the cheapest possible settlement, then you should choose an online provider.
Do I even need a Securities Account?
Before opening a portfolio, you should clarify a few basic questions for yourself: How important is advice to me? What am I willing to pay for it? How often do I plan to act? And above all: do I even need a Securities?
If you save up for a major purchase, for example, a new car, you don’t need a deposit. In this case, it is better to go with fixed-term deposits or overnight money, on which your money is safe and, provided you choose a low-interest provider, even increases slightly. In the capital market, on the other hand, you can win a lot of money in a relatively short time, but you can also lose it.
Securities and therefore, a deposit only makes sense if you plan to make long-term investments, for example, for old-age provision. Because in the long run, you will generally achieve significantly higher returns with a securities account than with a savings account – and without paying a higher risk. Because in the long run, exchange rate fluctuations in the meantime are no longer as significant.
How do I find the right Securities Account?
If you don’t want to do without personal advice, you can simply open your custody account at your local house bank. However, even then, you should pay attention to the costs, because an average investor with a deposit volume of 25,000 euros and five to ten transactions per year pays over 500 euros more annually with some branch banks than with an online bank. Concerning the size of the portfolio, that is a return of two percent. Banking advisors like to claim that fees are negligible as long as the investor chooses the right securities.
However, this is a fallacy. Because high fees always wipe out a considerable part of the return in the long term, regardless of whether the portfolio is doing well or not. You should therefore compare the terms and conditions of the individual types of deposit at different branch banks in your area – and don’t be afraid to ask your advisor whether he can lower the fees a bit.
In any case, the cheapest option is to go with an online broker. But be careful: not every Internet provider is equally inexpensive. And not every broker is suitable for every investor. Why is that? The costs essentially consist of two items, namely the annual custody fee and the fees incurred for the individual orders
Many online providers such as DAB Bank, ING Diba, Maxblue or Flatex do not charge any annual fee. Nevertheless, such providers are not automatically the cheapest – especially for active investors who frequently switch their portfolios, the transaction costs are much higher than the annual basic fee.
You should, therefore, compare the various offers carefully and choose the online broker that best suits your investment behaviour. Our depot comparison can help you with this. Here you indicate how high your average order volume is and how many transactions you carry out per year. After a few moments, the calculator will show you a list of the providers that are right for you.
Fees should make up less than 1 percent of the investment amount
Divide the total costs shown by the calculator by the planned deposit volume. This should result in a value of less than 0.01 if possible – because only then can you be sure that the fees are less than one percent of your investment amount per year and therefore do not consume too much of the return.
How can I open the Securities Account?
If you want to open a securities account at your branch bank, it is best to do so with the help of your bank advisor. He fills out the necessary documents together with you. Opening a custody account on the Internet is a little more complicated – but not by much.
The application for opening a custody account can be found on the providers’ websites. You can either print out the relevant forms yourself or have them sent to you free of charge. First, enter your personal data, for example, your address, birthday, e-mail address, telephone number and, if necessary – more on this below – your current account.
In addition, the online broker requires written self-disclosure about your stock market experience – for example, this broker wants to know whether you have already traded stocks or what risks you want to take on the stock market. The banks are obliged to answer these questions because the legislature wants to prevent inexperienced private investors from buying unsuitable financial products.
You do not have to fill out the self-assessment. However, the broker may then exclude you from certain deals.
*Important: If you want to trade not only with “normal” securities such as stocks or bonds but also with high-risk products such as warrants, you must sign the form “Important information about the risk of loss in financial futures” in addition to the self-assessment – otherwise the broker will refuse you Access to option deals.
The easiest thing to do now would be to put the completed application in the nearest mailbox. But that doesn’t work – because how should the online bank know that the documents actually come from you? You must therefore go to a post office where the employee will check your ID before forwarding your application to the custodian bank.
This procedure is called “Post-Ident”. After that, it usually takes a few days until you receive the documents for activating your online depot – again by post. For security reasons, the access data come in a separate envelope. Now you only need to set up your custody account with a few clicks.
Opening a custody account with the online broker
- Search the Internet for the right provider for you.
- Fill out the application to open a deposit.
- Go to the post office with the complete application documents. Do not forget your identity card or passport for the Postident procedure.
- After a few days, the bank will send you the documents for activating the deposit. Now complete your deposit opening on the Internet.
Video instead of post-identity
The first online brokers, such as Comdirect are currently introducing the so-called video identification process. This saves you having to go to the post office because you can legitimize yourself to the bank via webcam when you open your deposit.
In the next article, we will describe how securities account work, which pitfalls to consider and how to change an account provide.