Brokers offering interest on share portfolio

stphnstevey · 10 July 2019 at 10:29AM

Yes, interest on share portfolio rather than interest on cash

I have seen this offer on several platforms, some give more information than others

They say you can sell your shares as normal and anytime as this is a daily calculation

What are the risks here?
Platform failure? Can this potentially be minimised by using the largest brokers?

Are the returns worthwhile?

For example:

Your portfolio can be worth more
If you have shares, securities, government bonds, ETFs and covered warrants (among those listed by Fineco), you can loan them and receive remuneration of up to 5% gross per annum. The Interest-bearing portfolio service is offered to you at no added cost and gives you total freedom: The value of your securities does not change as a result of the loan and you can sell them at any time without prior notification. Find out the details
https://help.finecobank.com/uk/portfolio/reporting.html#interest-bearing-portfolio

I believe Interactive Brokers also do something similar

bowlhead99 · 10 July 2019 at 12:24PM

Stock lending allows you to loan your stock to someone else (generally so that they can sell it in the market at the current price as part of a shorting strategy, and will owe you the shares back with interest/dividend when you want the shares back in your own hands).

You will not get interest rates of 5% on most easy-to-come-by mainstream blue chips.

The problem is not solely one of platform failure -though yes it would be problematic if they went under and lost the records showing to whom they had lent your shares... It is also counterparty risk/ credit risk - what happens if the person who borrowed your shares becomes insolvent and can't give you back your shares or cash for the right value? Lehman Brothers probably looked like a decent risk before they suddenly weren't ; then people had to pore over the records for years to find out how everything should be allocated and what can afford to be paid.

tin586 · 10 July 2019 at 7:44PM

I don’t feel this is worthwhile (returns will not be as significant as you might expect) and it should not be a factor in choosing a platform.

The reality is that an ETF from the likes of Blackrock/iShares or even Vanguard will engage in stock lending (hopefully to boost your return), irrespective of whichever platform you’re on. I am comfortable with that.

I am not inclined to sign up with a trading platform run by an Italian bank (Fineco). I have never heard of Interactive Brokers and will not be researching further than my quick initial google.

The cheap/free/freemium broking space seems to be getting pretty crowded recently. It’s probably useful to have a long barge pole in hand.

Brokers offering interest on share portfolio

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