Nasdaq-listed electronic broker and trading platform Interactive Brokers (IBKR) is set to open a local bank account in the region for dirham-denominated cash transfers as it seeks to expand its Middle East client base.
The move is expected to offer customers savings on international wire transfer fees and currency exchange, while also making it easier for them to invest in global stocks.
“We are exploring opening a bank account in the region, which would improve our clients’ experience when funding with AED,” an Interactive Brokers representative told The National.
The company told The National in April that it plans to establish a branch in the Dubai International Centre, subject to approval from the relevant authority.
The electronic brokerage company is among the world's largest, with 2.39 million daily trades on average, according to IBKR's website. The Connecticut-headquartered company has more than 2.92 million registered client accounts and offers services to individual investors, hedge funds, proprietary trading groups, and financial advisers, among others.
Through the company’s platform, users can buy and sell securities, commodities, and foreign exchange in more than 150 markets in 27 currencies, according to its website.
The online trading platform is regulated by the Securities and Exchange Commission and the Financial Industry Regulatory Authority in the US, and other regulatory bodies around the world.
A post by a member of the SimplyFI Facebook group, a private community of personal finance and investing enthusiasts, said an IBKR local bank account will support quick transfers.
“IBKR will have a local dirham account with First Abu Dhabi Bank by the end of the year. That means free, instant local transfers in AED,” Steve Cronin, a financial independence coach and founder of DeadSimpleSaving.com, wrote in the group.
“This will be followed by some other GCC currencies (especially Saudi riyal), local phone numbers for support and access to local stock exchanges.
“For now, your assets will continue to be in the US under US brokerage protection. That might change in a couple of years’ time to having assets in the local entity.”
First Abu Dhabi Bank did not provide a comment in response to The National.
Currently, Interactive Brokers accepts dirhams but only via a dirham-dominated bank account in the UK. Not all banks permit international AED-to-AED transfers and it's easy to send the amount in pounds accidentally because the account is in the UK, Mr Cronin said. Additionally, international dirham transfers can cost between Dh100 to Dh150 each time, he added.
“Now investors will be able to send small or large amounts to Interactive Brokers quickly and securely,” he said. “Interactive Brokers is one of the largest, cheapest and most secure brokerage platforms, making it easy to invest in global stock funds and bond funds from Vanguard and iShares. Their currency exchange rates are also excellent.”
Alison Soltani, founder of the savings website Leap Savvy Savers, said that residents who want to invest in global shares and funds often have to exchange dirhams to another currency, such as dollars, euros or pounds, in order to invest. This process incurs fees and sometimes results in poor exchange rates.
This affects the amount of money they have to invest and one of the golden investing rules is to keep fees low to maximise your returns, she said.
“IBKR has excellent exchange rates, so even if you want to invest in another currency, changing currency within IBKR is favourable. This will also benefit residents as they can set up automatic transfers to ensure investing becomes a habit for them,” Ms Soltani said.
The ease of funding their investment account will also help people to keep investing using the dollar cost averaging method, as the easier a process is, the more likely you will be to stick to it
Alison Soltani,
founder, Leap Savvy Savers
“The ease of funding their investment account will also help people to keep investing using the dollar cost averaging method, as the easier a process is, the more likely you will be to stick to it.”
Wali Khan, a UAE-based investor, previously funded his IBKR account with HSBC, which involved a fee of about $40 to $60. He now funds his IBKR account using digital bank Wio’s USD bank account.
“It does not charge anything if I fund for less than $1,000 and choose to split the transfer fee between sender and receiver. The Wio USD is funded from a Wio AED account with bank rates for AED > USD conversion,” Mr Khan said.
“In case IBKR brings AED transfer directly, it will help local investors tremendously and remove the friction of always calculating how to fund a basic investment account.”
Karthik Balasubramaniam, another investor in the UAE, said IBKR’s local set-up would ease funding and improve communication with the platform.
With favourable FX rates, zero transfer fees for transfers below $1,000 and nominal charges for more than $1,000, USD/Euro with Wio bank seems to be the best option to fund the IBKR account now, he added.
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Build an emergency fund: Make sure you have enough cash to cover six months of expenses as a buffer against unexpected problems before you begin investing, advises Steve Cronin, the founder of DeadSimpleSaving.com.
Think long-term: When you invest, you need to have a long-term mindset, so don’t worry about momentary ups and downs in the stock market.
Invest worldwide: Diversify your investments globally, ideally by way of a global stock index fund.
Is your money tied up: Avoid anything where you cannot get your money back in full within a month at any time without any penalty.
Skip past the promises: “If an investment product is offering more than 10 per cent return per year, it is either extremely risky or a scam,” Mr Cronin says.
Choose plans with low fees: Make sure that any funds you buy do not charge more than 1 per cent in fees, Mr Cronin says. “If you invest by yourself, you can easily stay below this figure.” Managed funds and commissionable investments often come with higher fees.
Be sceptical about recommendations: If someone suggests an investment to you, ask if they stand to gain, advises Mr Cronin. “If they are receiving commission, they are unlikely to recommend an investment that’s best for you.”
Get financially independent: Mr Cronin advises UAE residents to pursue financial independence. Start with a Google search and improve your knowledge via expat investing websites or Facebook groups such as SimplyFI.
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