Safe(r) acct. where to move euros from Wise to hold short term?

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Maris61
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Safe(r) acct. where to move euros from Wise to hold short term?

Post by Maris61 »

Spouse and I (both U.S.) recently exchanged dollars for euros with Wise (aka Transferwise).
We want to hold several thousand euros short term (2-4, maybe 5 months) for purchase of small, rural house in Europe.

Then I started reading skeptical posts here on Bogleheads about the potential protection—if any—that comes with holding larger amounts in Wise acct. Some folks caution against holding much more than 3k, perhaps b/c of the lack of protection (as well as the monthly 0.075% fee for anything over 3k).

So if we do not have a European bank acct. yet, what are some of our most affordable options for where to move the Euros from Wise to hold in a *safer* acct.? Something simple to transact?

Thank you for any tips!


EDITS:
-I’ve read that US banks can hold Euros in a separate acct., but I’m less than thrilled at that prospect. For one, our bank (Wells Fargo) seems to love its higher fees and I don’t want yet more value to burn off of our money.

-The other name I see repeatedly is Interactive Brokers (IB or IBKRS). Would that work somewhat like a bank for holding Euros as cash? But w/o FDIC. Though it sounds like there’s at least more implicit protection than holding thousands in Wise, correct?
Does anyone know if it’s possible to move euros directly from Wise to IB?
German Expat
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Re: Safe(r) acct. where to move euros from Wise to hold short term?

Post by German Expat »

I would assume you can move Euro's from Wise to IBKR but never tried it myself. I did move various currencies to my IBKR account from other banks and it works flawless. I would assume as long as you can transfer money from Wise it should work ok.

But keep in mind that currently at IBKR above 50k Euro there is a negative interest rate on Euros (on the Pro account it is -0.821%):

https://www.interactivebrokers.com/en/a ... -rates.php
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Khan
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Re: Safe(r) acct. where to move euros from Wise to hold short term?

Post by Khan »

Yes, I do it eveey month from Wise to IBKR swift wire transfer. They accept WISE funding and withdrawals.
tubaleiter
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Re: Safe(r) acct. where to move euros from Wise to hold short term?

Post by tubaleiter »

If you're going down the Interactive Brokers route, consider using them the whole way: transfer USD to IBKR, convert USD to EUR with IBKR, hold those EUR with IBKR until ready to use. IBKR's conversion fees are tiny, often an order of magnitude less than Wise (Wise is cheap compared to most other options, but IBKR blows it away, especially for larger amounts). Here's a good writeup on using IBKR for currency transfers (not my blog, but I've followed the steps in it successfully: https://www.expatfinance.us/general/ibk ... -transfers)

You'll want to read the details on how your EUR balance would be protected at Wise vs IBKR. If we're talking several thousand EUR for up to 5 months, I wouldn't lose sleep over either option. For longer terms/higher balances, I expect IBKR would be safer (or a real bank), but you would need to be very clear on the exact protections in the country where your account is, since both institutions offer accounts in multiple different countries with different protection regimes.
jg12345
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Re: Safe(r) acct. where to move euros from Wise to hold short term?

Post by jg12345 »

I would personally leave them in wise if it's 5-6 months and below <20k or so

The 3k suggestion is for those using it regularly, so the idea is to keep there only the money you need to live.

For 5-6 months I think you can tolerate a higher balance.

With all that said, why not just do everything with IBKR as suggested by another poster? I can't see how Wise is better, other than probably simplicity and having a debit card (which IBKR does not offer in Europe but does offer in US)
Topic Author
Maris61
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Re: Safe(r) acct. where to move euros from Wise to hold short term?

Post by Maris61 »

Thank you for the feedback thus far!

RE. the warning (https://www.expatfinance.us/general/ibk ... 09gpqqvljc) that IBKRs may close an acct. mainly or only used to exchange currency then withdraw: is there any addl. info out there about this?

Presumably they wouldn't threaten to do so until After withdraw(s) have already occurred?

Could IBKRs conceivably close an acct. flagged as such but otherwise in good standing when the acct. still had funds in it--and pocket that money? No matter IBKRs' preferences, that'd obviously be illegal, correct?

Just a very disconcerting caveat, so I need to have absolute clarity here.
tubaleiter
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Re: Safe(r) acct. where to move euros from Wise to hold short term?

Post by tubaleiter »

Maris61 wrote: Fri Jul 15, 2022 5:34 pm Thank you for the feedback thus far!

RE. the warning (https://www.expatfinance.us/general/ibk ... 09gpqqvljc) that IBKRs may close an acct. mainly or only used to exchange currency then withdraw: is there any addl. info out there about this?

Presumably they wouldn't threaten to do so until After withdraw(s) have already occurred?

Could IBKRs conceivably close an acct. flagged as such but otherwise in good standing when the acct. still had funds in it--and pocket that money? No matter IBKRs' preferences, that'd obviously be illegal, correct?

Just a very disconcerting caveat, so I need to have absolute clarity here.
If IBKR closed your account, they would return your money. Zero question on that, they can't just pocket your money.

IBKR is a very expat-friendly brokerage too, so worth trying to keep them on your good side. One way to avoid worrying would be to put a couple thousand $ in an investment so you don't flag as using IBKR solely for currency transfers. Let them make a dollar or so on the investment order fee.
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Maris61
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Re: Safe(r) acct. where to move euros from Wise to hold short term?

Post by Maris61 »

I managed to set up my acct.--but I'm trying to be extra cautious before making my first deposit.

(Keeping in mind most of my investments are w/ TIAA and Vanguard, and I plan to use IBKR mostly for exchanging currency and holding it there in cash for a few months--though I also plan to take the advice here to purchase 1-2K etf total stock index or such.)

I want to research more about Interactive Brokers just for my general peace of mind; currently, I've skimmed through profiles, reviews, & misc. articles and posts such as on Forbes, Greenwichtime.com, defenseworld.net, and bogleheads.

I'm struggling to know what big picture to take away from denser documents, though, such as the various disclosures, including allegations and settlements such as in this recent FINRA document: https://files.brokercheck.finra.org/firm/firm_36418.pdf

Any general (or specific) advice for a relative novice researching a brokerage like Interactive Brokers???


EDIT: Maybe more concerning than that FINRA doc are the series of detailed negative reviews here: https://www.consumeraffairs.com/finance ... okers.html
Topic Author
Maris61
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Re: Safe(r) acct. where to move euros from Wise to hold short term?

Post by Maris61 »

Also, I was previously wondering whether a brokerage like Vanguard, for ex., has similar number of these kind of disclosed allegations and settlements?

After some more searching, answer appears to be no. If I'm simply comparing IBKR's recent FINRA doc (in post above) vs. Vanguard's recent SEC "Form ADV" (here at https://reports.adviserinfo.sec.gov/rep ... 106715.pdf), then IBKR has significantly more disclosed allegations & settlements.

....But I'm still not wholly set against IBKRs for what my purposes are, so my earlier question still stands:
Is there any addl. advice for an individual newcomer investor who wants to research a brokerage like Interactive Brokers???
cascadian
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Re: Safe(r) acct. where to move euros from Wise to hold short term?

Post by cascadian »

Have you looked into a more traditional global bank such as the HSBC global money account? The only downside is need for either $75k deposit or $5k monthly directed deposit to avoid $50 monthly account fee. The online only options such as Wise, Revolut and Bunq all seem to have a lack of global banking regulator, monthly fees or account fees for holding more than a few thousand dollars in a FX equivalent.
aspiring_kiwi
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Re: Safe(r) acct. where to move euros from Wise to hold short term?

Post by aspiring_kiwi »

Maris61 wrote: Thu Jul 28, 2022 5:09 pm Also, I was previously wondering whether a brokerage like Vanguard, for ex., has similar number of these kind of disclosed allegations and settlements?

After some more searching, answer appears to be no. If I'm simply comparing IBKR's recent FINRA doc (in post above) vs. Vanguard's recent SEC "Form ADV" (here at https://reports.adviserinfo.sec.gov/rep ... 106715.pdf), then IBKR has significantly more disclosed allegations & settlements.

....But I'm still not wholly set against IBKRs for what my purposes are, so my earlier question still stands:
Is there any addl. advice for an individual newcomer investor who wants to research a brokerage like Interactive Brokers???
To ensure an apples-to-apples comparison, I'd suggest looking at other retail brokerages. Vanguard's focus on mutual funds and long-term buy-and-hold investors makes it a bit different. Not sure if the SEC Form ADV is different either.

Looking at TD Ameritrade, e-trade, schwab, or edward jones, I don't know that IBKR stands out in a negative way. Those firms all have long reports w/ large numbers of regulatory events and arbitration events. Normalized for size, maybe IBKR is worse (or better), but I couldn't say offhand.

I can say that I've used IBKR to convert very large sums of cash to a foreign currency. At $20/million, their forex conversion fee is unbeatable. Kind of nice to be able to place limit orders too, rather than an arbitrary market order. 1 free wire transfer per month, and reasonable fees for additional wire transfers. I've got 10K in a bond ETF, and had a very large cash balance when converting. One catch was that their policy changed while I had foreign currency sitting there (I'd wanted to lock in a good rate). For a while, they wouldn't allow me to withdraw that currency (NZD), b/c it wasn't one of the "major currencies" and they blamed their AML policies as prohibiting withdrawals in that currency unless it was deposited in that currency. A few months later, when I was ready to move the remaining 80%, the policy had changed and I was able to wire the funds out. So definitely check into that, and be aware that policies change.

Also, most likely because I was moving large sums, their compliance department also contacted me to prove that the funds moving in came from my own accounts, that the funds moving out went to my own accounts. No real inconvenience other than a scary-sounding notice that I needed to provide proof asap or face an account freeze. I promptly provided statements and they promptly closed the matter.

For what it's worth, IBKR is known as being one of the very few institutions that are expat-friendly, and I anticipate having more funds invested with them in the future.
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Maris61
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Re: Safe(r) acct. where to move euros from Wise to hold short term?

Post by Maris61 »

EDIT: Ah, so after re-acquainting myself w/ the taxable account bogleheads wiki page (https://www.bogleheads.org/wiki/Taxable_account), it seems that w/ 1-2k in a stock index etf inside an individual taxable acct. then as long as I keep holding it the tax burden should be pretty negligible, right??
If so, then just ignore all the stuff below....


Thank you all for the tips so far!

So I have my IBKRs acct. opened.
Money is deposited in it.
Now….

My Account Profile is Customer Type: Individual.

If I want to primarily use IBKRs for currency exchange (dollars to euros) but choose to invest 1-2k in, say, an index fund (to avoid acct. being flagged, as advised), then how do I know / what might that addl. tax burden be since this isn’t in an IRA??

I ask b/c this looks like it’s a taxable acct., which would be a first for me.

[My roth IRA, w/ Vanguard, is already maxed the 6k contribution for the year.
Spouse is covered by employer 401k plan and doesn’t have any IRA.
Our MAGI might just be low enough that I think she could still have an IRA, but that seems moot here b/c I already set up the IBKR profile in my name, and profile is “Customer Type: Individual.” And I don’t see where IBKRs allows for easy changes on that count.
Also, folks in reviews weren’t kidding about IBKRs perplexing site navigation—whew!
Makes Vanguard feel like play school.]

So I guess this is stuck as taxable “individual” type??

Lastly, any top recommendations on total stock index funds available via IBKRs that I could research??
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Maris61
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Re: Safe(r) acct. where to move euros from Wise to hold short term?

Post by Maris61 »

More questions/thoughts.... May just be talking to myself here. :)

In IBKR Lite, I didn’t have 110% confidence to purchase currency pairs as limit order (and most of the online guides for how to do that were in the Pro view/mode, not Lite).
So I just used the easier “convert currency” tab to place as market order.
There’s some “non-guaranteed basis” language that pops up followed by the “A Market Order is not guaranteed a specific trade price and may trade at an undesirable price” message.

Isn’t the market order for the convert currency tool still set to at max. trade at the rate shown in the main convert currency window??

(Though it appears, in theory, the “25% Cash Quantity Estimate Factor as a maximum size” could provide actually a much more favorable rate. But I doubt that rarely happens.)

In other words, in terms of reasonable rates is there serious significant risk for using the convert currency tool rather than placing a limit order??

(For currency exchange in Lite, to place a limit order I still don’t know what tab to use under Trade > Order Ticket….)

Wish I could easily attach images from screenshots here but not allowed….
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asset_chaos
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Re: Safe(r) acct. where to move euros from Wise to hold short term?

Post by asset_chaos »

I had an email from Wise this morning saying the fee to hold euros is gone. One more effect of negative interest rates has bitten the dust.
We’ve removed the fee to hold Euros

From the 1st of August you can hold as many Euros on your Wise account as you wish without any charge.

Why are we doing this?

We always want to provide you with the lowest possible fee for our service. We’re no longer in a negative interest rate environment. This means it doesn’t cost us money to hold larger amounts of Euro for our customers, so we’ve removed the fee to hold Euro in your Wise Account.
Of course, this doesn't mean the OP should use Wise to hold euros, it just removes one impediment.
Regards, | | Guy
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Maris61
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Re: Safe(r) acct. where to move euros from Wise to hold short term?

Post by Maris61 »

Thank you, asset_chaos, for that news.

Also, lingering questions I still have from previous I'll try to put more succinctly here (and if context is important, that's avail. in posts above).

In a taxable individual type account, a stock index etf like ITOT should present very limited tax burden, correct? (As long as it's held, of course.)

For IBKR, is there serious risk for using the convert currency tool rather than placing a limit order??

Either way, just so I know, is there any specific guide for how to place a currency exchange limit order via the Lite IBKR (regular browser version)?? I think I understand the idea about currency pairs—but which tab under Trade > Order Ticket do I even start with?

Many thanks!
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asset_chaos
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Re: Safe(r) acct. where to move euros from Wise to hold short term?

Post by asset_chaos »

Total US stock market index funds, like ITOT, should be tax efficient. You can look up ITOT's distribution history at ishares.com. I don't think ITOT has distributed any capital gains, nor is it likely to, but it will distribute dividends; however, all or almost all dividends will be qualified. A total market index fund like ITOT will be about as tax efficient as a stock fund can get.

As I've never used IBKR, I can't help with any tips on how to use it.
Regards, | | Guy
aspiring_kiwi
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Re: Safe(r) acct. where to move euros from Wise to hold short term?

Post by aspiring_kiwi »

Total stock market ETFs have generally been paying out dividends at 1.5-2% / yr. Some people really don't want even that amount of dividends and tradeoff diversification by going with Berkshire Hathaway, which pays no dividends. I personally wouldn't.

For IBKR, the convert currency tool gives you a pretty good "market rate." If you do it during the week, it should be close enough for most people. Not sure you can do it on the weekend (when the FX markets are closed), but if it lets you, you'd probably want to wait for the week when the fx markets are liquid. For small sums, it's no big deal. For 6 figure or larger sums, I'd personally rather take a look at the daily trading range and use a limit order, keeping in mind that if the market trades away from you, you might be worse off than just taking the immediate conversion.
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