With tough competition for clients, every broker tries to set itself apart. These two brokers are the ideal example of companies with similar services but different approaches. To know which of the two is the top broker, you have to look at them from different perspectives. Just remember that the top broker for you may not be the same for everyone, and it depends on your priority areas.
eToro was started in 2006 in Israel to capitalize on the growing retail online trading market. Since then, they have expanded their reach into almost every country in the world except for the US and Japan. Today, the company boasts of having more than 10 million active clients on its platform, proving that it is really one of the top brokers in the world. These people were initially drawn by FX trading, which still remains a huge part of their services, but now there are a lot more assets clients can trade. Add to that, some unique features like social trading really make eToro stand out among its peers.
Not to be left behind, Degiro is also a popular broker, although primarily within Europe. Degiro was created in 2008 by a group of traders from another brokerage company. The idea was to initially provide online trading to professional and institutional clients. But then later in 2013 they decided to extend their services to retail clients, perhaps because of the growing retail trading market. Since 2013, the broker has expanded beyond its Netherlands origin to reach 17 more countries in the EU and attain a client base of 400,000 active clients.
All these was simply meant to whet your appetite and prove these are both good trading brokers. Now it’s time to select the best one to start trading with, because there are always certain aspects that make one broker better than the other. Moreover, you may come to prefer one broker over another because of particular aspects of their services. That is why we shall be looking at these brokers in separate categories.
Fraud in financial markets is very common, and the only protection to investors is provided by the financial regulators. For this reason, you should only work with a licensed and regulated broker to ensure that your money is safe while trading. Since Degiro was first started in the Netherlands, this is where they are regulated by the Dutch Central Bank (DNB) and the Netherlands Authority for Financial Markets (AFM). Upon extending their services to 17 more European countries, including the UK, Degiro also got a license from the FCA with reference number 595455. These are both very reputable regulators, especially the AFM in the Netherlands, showing that Degiro can be wholly trusted by traders.
eToro was first given a license to operate within Europe by CySEC in 2010. As the company continued to grow, however, there came a need to acquire additional licenses in new territories. For its European operations, the company created eToro Europe, which is still licensed under CIF number 109/10. As regulations around the retail market became stricter, operations in the UK had to be run under a different subsidiary, eToro UK. This particular subsidiary is registered under reference number (FRN) 583263 as required by the FCA before signing up UK residents. By then, eToro could operate in most countries with the exception of the US and Japan, but the Australian market was just too lucrative to pass up. So, they created an Aussie subsidiary, eToro AUS with Services License number 491139.
Every financial regulator has the right to impose its own regulations, which may be different even from neighbouring countries. This is why brokers seek multiple licenses – to fulfil all requirements for operating within certain regions. Therefore, in this regard, eToro has outdone Degiro as it can legally operate in more countries.
Funding and withdrawal
It is especially important to know how you will be able to withdraw and deposit money from and into your trading account. Clients of eToro have access to numerous funding and withdrawal options including credit/debit cards, wire transfers and payment service providers like Skrill, Neteller and WebMoney. There are also some regional services such as Giropay and Yandex Money that are available in particular regions and with benefits to clients in those regions such as local currency without conversion fees.
For a global company like eToro, it would make sense to provide as many funding options as possible, but Degiro is more limited. In fact, the only way to make deposits and withdrawals into your Degiro trading account is by wire transfer. That leaves the company’s clients pretty limited. Perhaps the good news is that Degiro is only based in Europe, thus clients don’t suffer from currency conversion rates, but there are certain drawbacks to wire transfers such as the speed of processing transactions.
But Degiro clients are not suffering all around. Whenever you make a deposit at eToro, you’re not charged for the transaction, neither are you charged for withdrawals. Degiro also does not charge its clients on either deposits or withdrawals, making this equal. Degiro does not also have a minimum deposit for its clients, and they are free to deposit as little as they want. eToro, on the other hand, demands that new clients on its platform deposit a minimum of $200, after which the minimum decreases to $50.
Both Degiro and eToro have benefits to their deposit and withdrawal services, which leaves this category a tie.
Degiro prides itself mostly on the low trading fees, and this distinction has awarded the company many awards including Best Low-Cost Stockbroker by Financial Times & Investors Chronicle and Best Discount Broker by BrokerChooser, both awarded in 2018. Clients are charged fees in the form of commissions that vary depending on the market involved. Trading assets listed on the London Stock Exchange are cheaper because there is no connection fee as you would experience trading assets on the NYSE and Eurex.
eToro, however, only charges a spread and no commissions except when trading real assets where both spreads and commissions are applied. It is difficult to compare charges in commissions and spreads, but each is suited to a particular kind of trader. For instance, commissions are great for frequent traders because the charge remains constant all through. Meanwhile, spreads change every time depending on market volatility, and traders may suffer when spreads become much wider during moments of high volatility.
Once again, this section is a tie because each charge method has advantages and disadvantages depending on the type of trader.
eToro is a champ when it comes to having multiple tradeable assets on its platform. A majority of the company’s operations is in CFDs that include currency pairs, stocks, ETFs, commodities, indices and even cryptocurrencies. All these are provided with leverage depending on the subsidiary, where eToro UK is limited to a maximum leverage of 30:1 according to ESMA and FCA regulations. Other subsidiaries like eToro AUS and Europe do not have this limitation. Should a client choose to trade without leverage, their trades are made on real assets, which include stocks, ETFs and cryptocurrencies.
Degiro also has several categories of assets including stocks, ETFs, futures, bonds, options, and warrants. Clearly, this is quite a different set of assets compared to eToro, and none of these assets can be traded using leverage. Although there is no minimum required to trade any of the assets, lack of leverage may lock out some retail traders and reduce potential profits, although some may argue this also reduces the chances of making huge losses.
Since eToro provides both CFDs using leverage and real assets, it becomes a winner in this section.
Trading on both eToro and Degiro is done through a WebTrader as there are no apps to download to your PC. Nevertheless, there are apps for mobile devices to use while on the go. Both companies have made their trading platforms robust and included all necessary charting tools, so there is no clear winner, making these companies tied.
Types of trading accounts
Most brokers offer a demo account for practice, including eToro, but Degiro did not think this would be necessary. Instead, the company only has basic, active, trader and custody accounts. Basic and custody accounts do not access debit money, debit securities and derivative trading while active and trader accounts do. Islamic accounts aren’t available either as eToro provide based on religious belief. eToro clients also have varying levels of accounts such as the VIP account with certain benefits.
Here too, it’s impossible to find a clear winner, leaving a tie.
eToro is well known for providing social trading through the CopyTrades feature. This allows any trader to copy trades from another trader if they feel the provider of the signal is better than them. Another innovative feature is CopyPortfolio that acts as an ETF and traders can freely invest in it. Degiro does not have any such unique features and traders just have to do with the basic services.
Winner is clearly eToro.
Official figures show that 66% of eToro clients lose money while trading, while 76.4% of Degiro clients lose money. Therefore, Degiro is right at the industry average while eToro clients are winning more than they are losing, probably thanks to social trading.
Winner is eToro.
To reduce the number of losing clients, brokers are spending more on educating their clients. Here, eToro’s massive client base proves too much as clients have access to a lot of articles by other traders and get real-time updates. Degiro has instead chosen to focus on educating clients on the basics of their services, which although helpful, does not help traders on their day-to-day activities.
Winner is eToro.
When all the above are considered, eToro emerges as a clear winner, beating Degiro in almost all categories. That being said, some traders will be attracted by the latter’s low fees and access to specialized financial markets.