How to invest safely with a foreign broker?

With the advent of the internet, it is now easier than ever to invest with a foreign stock broker. In this article, I will discuss how you can verify whether a broker is reliable.

Are you curious about which brokers I like to invest with? Use the button below to compare the different options:

Tip 1: Research where the broker is registered

In Europe, a foreign broker only needs to be registered in one European country to offer its services everywhere. Some financial regulators take their work more seriously than others. Therefore, it can be smart to thoroughly investigate whether the company is engaged in fraud.

Never invest with parties that promise guaranteed returns. Remember that when you invest with a foreign party, you can lose your entire investment.

Tip 2: Check the financial regulator

Brokers may sell their investment products in all countries with one registration in Europe. Therefore, make sure to verify whether the broker is actually registered with the listed regulator.

If a broker is registered with a foreign regulator, it is important to examine what the rules of this regulator are. For example, up to what amount is your money safe with the broker? In the rare event that a broker goes bankrupt, it is critical to know what will happen to your money.

Tip 3: Investigate the broker’s reputation

Personally, I always check on Trustpilot whether the broker has received good reviews. If there are many complaints about a foreign broker, it’s better to avoid them.

Tip 4: Spread your risks

European brokers must store their clients’ assets in a separate custodian company. This way, you don’t lose your securities if the broker goes bankrupt.

However, you never know for sure if this will go smoothly. By investing with multiple brokers, you spread the risks and avoid losing everything when a broker turns out to be shady.

Tip 5: Read the fine print

Finally, it is essential to read the fine print carefully. For example, some brokers sell their order flow to other parties. This allows the broker to offer transaction fees, but there is a chance that they will sell the orders at less favourable rates.

Some brokers also lend your securities to third parties. If the counterparty unexpectedly cannot return your securities, you could lose a lot of money.

Always read the broker’s terms and conditions carefully to prevent yourself from facing unexpected, unpleasant surprises.

Pros and cons of investing abroad

Foreign brokers can sometimes offer better trading conditions without limiting investment opportunities. Additionally, foreign brokers often provide better access to local markets.

However, it may be more difficult to contact a foreign broker. Therefore, always check if and how you can reach the broker. Personally, I only invest with large foreign brokers with a good reputation.


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Alex Mostert Avatar
Over Alex Mostert

When I was 16, I secretly bought my first stock. Since that ‘proud moment’ I have been managing for over 10 years. It is my goal to educate people about financial freedom. After my studies business administration and psychology, I decided to put all my time in developing this website. Since I love to travel, I work from all over the world. Click here to read more about! Don’t hesitate to leave a comment under this article.

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