Banks Charge Higher Fees for Foreign Stock Trading Than Investment Houses
Translated & summarized from Calcalist by baba
Israeli banks charge significantly higher fees for trading foreign stocks compared to investment houses, largely due to hidden currency conversion costs. A "Calcalist" investigation found that converting NIS 10,000 to dollars for foreign investments costs about 71% more at banks than at investment firms. These hidden fees, including exchange rate spreads and explicit conversion charges, can add up to hundreds of shekels for relatively small transactions, making investment houses a more cost-effective option for many investors.
The story in 6 lines · by baba
- Israeli banks charge significantly higher fees for foreign stock trading than investment houses.
- Hidden currency conversion costs at banks are a major factor in the higher overall expense.
- Converting NIS 10,000 to dollars for foreign investments costs an average of NIS 94 at banks versus NIS 55 at investment houses.
- Banks' fees include both exchange rate markups and explicit currency conversion charges.
- The total cost for a round trip of buying and selling foreign securities can reach NIS 200 at banks.
- Digital bank OneZero is attempting to compete by offering a simpler, lower-cost currency conversion model.
Israeli banks are significantly more expensive than investment houses and brokers for trading foreign stocks, primarily due to hidden currency conversion fees. A "Calcalist" investigation found that while investment firms typically charge lower commissions and sometimes waive custody fees, banks impose substantial markups on currency exchange.
For instance, the average commission for buying and selling securities in banks is 0.2% of the transaction value, compared to 0.08% at investment houses. Minimum transaction fees are also higher at banks (NIS 31) versus investment houses (NIS 8). The primary hidden cost, however, arises when Israelis convert shekels to dollars to buy foreign stocks.
Banks often charge both a separate currency conversion fee and offer a less favorable exchange rate. The investigation revealed that converting NIS 10,000 to dollars for foreign securities costs an average of NIS 94 at banks, versus approximately NIS 55 at investment houses and trading platforms, a difference of about 71%. This includes the exchange rate spread and explicit fees, with bank spreads ranging from 0.8% to 1.2% on top of explicit conversion fees.
Investment houses generally operate on a simpler model, earning from the spread between the market dollar rate and the rate offered to clients. For example, Excellence charges a 2 agorot per dollar spread, while IBI charges 0.7% for transactions under $15,000 and 0.5% above. Newer platforms like Interactive Israel offer very low commissions, such as 0.002% with a NIS 10 minimum.
These hidden costs can accumulate, with a round trip of buying and selling foreign securities worth tens of thousands of shekels potentially costing around NIS 200 at banks. Digital bank OneZero, controlled by Amnon Shashua, is attempting to compete by adopting a model similar to investment houses, charging a fixed spread of 2.5 agorot per dollar instead of separate conversion fees.