ETF fees in 2024. How do ETF fees work?


This is a complete guide on ETF fees for European Investors. 

In this article we will compare the fees of two of the largest investment platforms providing ETFs to European investors, Interactive Brokers (IBKR) and Saxo Bank

Specifically, we will focus on two types of ETFs:

  • ETFs domiciled in the EU.
  • ETFs domiciled in the USA

ETFs domiciled in the EU are also called UCITs if they abide by the rules set by the relevant directive. 

Namely, UCITs should be diversified and provide a KID (a standardised document which provides investors with important information about the fund)

Let’s see below how ETF fees work.

ETFs domiciled in the EU

Transaction Costs or Commissions

Transaction costs are incurred whenever you buy or sell an ETF. They are deducted immediately when you open or close a position.

Saxo Bank

For Saxo Bank the usual fee is 0.1% per transaction, with a minimum fee ranging between €10 and €12. 

For example, for the ETF with code name CMOD they are €12 and for the ETFs with code name SXR8 and IUSM are €12.

You are charged whatever amount is larger between €10 or 0.1% per transaction. For example if you want to buy shares of an ETF with a total value of €20,000 you will pay €20 (=0.1% x 20,000).

Interactive Brokers

For Interactive Brokers the transaction fees are slightly lower for smaller amounts. 

The fee per trade value for euro denominated products is 0.05% with a minimum per order of €1.25 and a maximum of €29. 

For example if you want to open a position of €10,000 the fee will be: 0.05% x 10,000 = €5. But if you want to open a position of €200,000 the fee is just €29 since 0.05% x 200,000 = €100. 

For both brokers these fees are standard regardless of the type of ETF.

Ancillary Charges

These are the custody fees. As you already know the investment platform is just an intermediary between the investor and the custodian bank. All your assets are held in secure accounts by the custodian.

Saxo Bank

The minimum custody fee for your whole portfolio is €5 per month and it is charged monthly. This is the reason why we discourage investors to invest less than €5,000 per ETF.

The actual custody fee for your ETF is 0.15% per annum.

For a portfolio of €30,000 the custody fees are €60, since €60 > €45 (= 0.15 x 50,000)

For a portfolio of €50,000 euro the custody fee will be €75, €75 (= 0.15 x 50,000)> €60

Interactive Brokers

Interactive Brokers do not charge custody fees. 

Expense Ratio or Financial Instrument Costs 

The financial instrument costs are related to the expenses required to operate the ETF. Active funds have a higher FIC than passive funds.

FIC are separated into two categories: ongoing charges and exit/entry fees.

The ongoing charges range from 0% to 1% and are already embedded in the total value of each position.

Practically, this means that if you have an open position with a total value of €50,000, then the net value of this position is €49,650. If the next day the value of your position increases by 5%, then the gross value is €52,500 and the net value is €52,132.5

Expense Ratio does not depend from the investment platform, since it is set by each fund.

Next Update 

In the next update of this article we are going to discuss the following issues:

  • What are exit and entry fees? Why do funds such as 4GLD (the main gold ETF) and CMOD charge entry/exit fees? Are these fees deducted from the price? 
  • Does Interactive Broker charge inactivity fees? What does this practically mean? Are long-term investors discouraged from investing with Interactive Brokers?

Leave a Comment