Opening a brokerage account
You can usually open a brokerage account in under half an hour. Three steps matter: proving who you are, the settlement account and the questions about your experience.
Learning objective: After this lesson you can open a brokerage account yourself and know what matters along the way.
The process is almost the same everywhere. You fill in a form with your details, prove who you are, set up a settlement account and answer a few questions about your experience.
Proving Your Identity
You prove your identity by video, with a photo of your ID or at the post office. Have your ID ready and make sure the light is good, and it's done in a few minutes.
Questions About Experience
The experience questions come with a temptation: ticking more than is true so you're allowed to trade more. Don't. The questions aren't a test. They protect you by blocking risky products, and that's exactly what you want at the start.
Starting Small
Then you transfer money to the settlement account. Start small. Lisa first transferred €50 and bought one ETF share with it, just to see the whole process once. Only then did she set up her savings plan.
Proving your identity is required by anti money laundering laws, there's no way around it. Then comes the so called appropriateness test. The provider has to ask about your knowledge and experience and warn you if a product doesn't suit you. If you give false answers, you undo this protection, and it can be harder to enforce claims later.
The Settlement Account
There are two kinds of settlement account: an account with the broker itself and a reference account at your own bank. You can usually only withdraw money to that reference account, which must be in your name. That may seem awkward, but it protects you from someone else draining your money.
Tax Differences
For tax there's an important difference between domestic and foreign providers. With a German account you can file a tax exemption order up to the saver's allowance, and the bank pays the tax automatically. With a foreign account that usually doesn't happen. Then you have to declare everything yourself in your tax return. For investors in Belgium or Austria the same applies under each country's own rules.
Summary
- Answer the experience questions honestly. They protect you.
- Withdrawals only go to a reference account in your name.
- With a foreign account you have to handle tax yourself.
Did you get it?
Why should you answer the experience questions honestly?
Because they trigger a protection that blocks risky products or adds warnings.
Where can you withdraw money to?
Usually only to a registered reference account in your name.
What's the most important tax difference with foreign accounts?
Usually no tax is withheld automatically. You have to declare everything yourself in your tax return.
What others often ask about this
How much money do I need to get started?
Many brokers allow savings plans from a few euros a month. €25 to €50 is common. More important than the amount is having an emergency fund and clearing expensive debt first.
An account for my child, in whose name?
An account in the child's name belongs to the child. Parents can't simply take the money back, and at 18 the child controls it. An account in your own name keeps control with you. Which is better for tax depends on the country.
Check your understanding
Your task
Before opening an account, write down three things: the amount for your first test transfer, for example $50, the documents you will have ready, and how you will answer the experience questions honestly. Write one sentence on which kind of product you deliberately do not want to trade at the start.
Sources and further reading
- Section 63 of the German Securities Trading Act (WpHG) requires investment firms to assess a customer's knowledge and experience before certain transactions and to warn if a product appears unsuitable. View source ↗
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