On 10.02.2022 DeGiro notified Elle that her Depot is going to be closed due to inability to run a bank account for an underage person.
This is a very illustrative case of the operational risk.
Previously, we have (a)periodically reported about the deterioration of DeGiro broker. However, those cases were rather due to the stupidity of European financial regulators rather than to DeGiro itself.
But the terminal problem (both in the sense "last" and "which terminates business with DeGiro") is due to DeGiro's inability to run the banks accounts for juniors (although many financial institutions in Germany do). Actually, it is DeGiro's inability to think strategically in long term: a junior customer will sometimes become senior and since s/he got started with stock market very early, there is a good chance that s/he will be a valuable customer. Actually, Elle has likely already generated an above-average margin for DeGiro... But something like this was indeed to expect from DeGiro after it has merged with Flatex (which also first was a revolutionary broker but ended up in deterioration).
Anyway, the life goes on but before we go further with our experiment, we have to learn from this case. An this is a good case to illustrate the operational risk.
Although our current portfolio is affected by the market correction (about -10%), we did not worry about it per se. First of all we have about 20% of wealth in cash, which would give us an opportunity in case of a panic sellout. Secondly, all stocks (except the Roblox) are very solid fundamentally thus the recovery and further growth is (most likely) just a matter of time.
However, the depot termination makes this matter of time critical. The cash will be transferred back to Elle's bank account on 24.02.2022 thus there is a risk to miss the sellout while opening a new depot by another broker will take a time. As to positions in stocks, they will be closed on 15.05.2022. This is actually less critical and will only cause some excess broker fees (DeGiro promises not to take fees if depot is transferred to another broker... but they would better refrain from taking broker fees by position closing, since to transfer a depot is more complicated than to close all positions and transfer the cash).
And last but not least what happens happens for the best. In a recent past we have regretted that we have no zero-commission brokers in Germany. Now there are many of them so we got a good opportunity to try them!
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