Dutch broker offers Irish customers low-cost alternative to RaboDirect

Dutch online broker Degiro is set to offer Irish customers free access to some 800 low cost funds in an effort to lure departing RaboDirect customers on to its platform.

From March 1st, the broker will offer free trading in investment funds, including those currently offered by RaboDirect, to Irish clients. The broker currently offers free trading in some 700 exchange-traded funds (ETFs). The move means customers of RaboDirect’s funds platform, which consists of some 50 funds, will be able to continue investing in these funds with Degiro at a lower charge.

Speaking in Dublin on Tuesday, co-founder Gijs Nagel said Degiro will not charge customers an entry or exit fee on the funds – RaboDirect typically charged a 0.75 per cent entry and 0.75 per cent exit fee. He added that the only fee customers will face is the annual management charge imposed by the fund (typically upwards of 1 per cent).

Trading account

Customers also will not be charged for having an account with Degiro, with the company hoping that once customers join the platform they will then consider opening a trading account, through which Degiro will earn fees.

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Mr Nagel said that in the Netherlands a typical retail investor holds 80 per cent of the portfolio in passive investments such as funds or ETFs, and 20 per cent in active.

RaboDirect had about 5,400 Irish customers before it announced its decision last year to close its Irish investment platform by April 24th this year. While RaboDirect customers can sell their investments before this date without incurring the typical exit charge, they have also been given the option of continuing their investment with Cantor Fitzgerald.

However, while Cantor has committed to maintaining fees customers faced with RaboDirect for the first 12 months, the broker may decide to make changes thereafter.

Degiro launched in Ireland in 2015, offering a low-cost alternative to existing players. Even though the company “doubted we should do it”, Mr Nagel said, given Ireland’s low population size, since then growth has been swift, and Degiro has built up a platform of some 6,000 customers here.

Noting that Ireland is a “little bit special” in a European context due to higher-than-typical brokerage charges, Mr Nagel said brokerage fees here are “so expensive it’s ridiculous”.

Degiro says trading €1,000 in Bank of Ireland shares will cost an investor €2.40, compared with as much as €100 with other competitors.

Founded in 2008, Degiro now has 150,000 customers across 18 European countries. The broker does not operate a branch in Ireland and is not regulated by the Central Bank of Ireland. It operates across Europe under the regulatory capital supervision of the Dutch central bank and under the general regulatory scope of the Netherlands authority for financial markets.

Degiro has 160 employees, and reported net profit of some €1.5 million in the third quarter of 2016.