Four Types of Fees to Note Before You Buy International Shares Online

The Australian market only makes up about 3% of the world’s total stock market value. It’s a very small pool when it comes to the global investment picture and consequently Australian investors may seek to go offshore to buy international shares online with their share investing to diversify and also gain access to some of the biggest household names on the global stage.

However if you are looking to invest, the Australian market only makes up about 3% of the world’s total stock market value. It’s a very small pool when it comes to the global investment picture and consequently Australian investors may seek to go offshore with their share investing to diversify and also gain access to some of the biggest household names on the global stage. Nonetheless, if you are looking to invest offshore there are things you need to consider, one of them is fees associated with international share trading.

It’s important that you carefully consider how the fees will impact your investment before it’s too late. Outlined below are four fees that you need to be aware of before opening an international share trading account.

Type #1: Currency Conversion Fees

When you buy international shares online in a foreign market the shares will settle in the home currency of that market. For example, if you buy shares in the US those shares will need to be settled in US dollars (USD). Therefore, if you have Australian dollars (AUD) with your broker, the AUD will be converted to USD to the value of the share trade. During the currency conversion process a fee or “mark-up” is built into the conversion rate by the broker. This will also occur when you sell the shares and have the funds converted back to AUD. You may have experienced this fee if you travelled overseas and converted money at the airport or purchased items in a foreign currency on your credit card.

Ask your stock broker for their currency conversion fee before opening an international share trading account. Some brokers may also have a multi-currency ledger facility that will allow you to trade actively in the same foreign currency without converting to AUD for each trade. PhillipCapital provides multi-currency ledger facility to help our clients save costs when they buy international shares online.

Type #2: Custody Fees

If you own Australian shares then they would either be company sponsored with an issuer reference number (ISN) or CHESS broker sponsored with a holder identification Number (HIN), which means that you have direct ownership and complete authority for the shares and have complete authority. International shares have a different ownership structure. When you buy international shares, they are held in custody by a custodian, which is usually a large global financial institution.

This means you don’t have direct ownership of the shares but instead the shares are held in custody. However, you do have authority to sell shares and receive dividends. This may incur custodian fees charged by the broker. It is usually charged on monthly or quarterly and may be charged per holding.

Type #3: Foreign Exchange Fees

Most foreign stock markets charge some sort of fee for trading on their stock market. Usually this is iin the form of a percentage of the volume of shares traded, or in rarer cases for a small fixed fee. You can check the fees by researching the stock market you are interested in or by asking your broker.

Type #4: Inactivity fees

If you are not actively trading your international shares account you may be charged inactivity fees by your broker and typically the fee could be charged quarterly or annually. Some brokers waive this fee, so it’s important to ask the broker for their fee policy. At PhillipCapital, we do not charge our clients inactivity fees.

Read more guide on how to buy international shares. 

Disclaimer: This publication has been prepared solely for the information of the particular person to whom it was supplied by Phillip Capital Limited AFSL 246827 and/or Phillip Capital Trading Pty Ltd AFSL 246796 (together “PhillipCapital”). 

This publication contains general securities advice.  In preparing the advice, PhillipCapital has not taken into account the investment objectives, financial situation and particular needs of any particular person.  Before making an investment decision on the basis of this advice, you need to consider, with or without the assistance of a securities adviser, whether the advice in this publication is appropriate in light of your particular investment needs, objectives and financial situation.  PhillipCapital and its associates within the meaning of the Corporations Act may hold securities in the companies referred to in this publication.  PhillipCapital believes that the advice and information herein is accurate and reliable, but no warranties of accuracy, reliability or completeness are given (except insofar as liability under any statute cannot be excluded). No responsibility for any errors or omissions or any negligence is accepted by PhillipCapital or any of its directors, employees or agents.  This publication must not be distributed to retail investors outside of Australia.

It is recommended that you seek independent advice and read the relevant Product Disclosure Statement before making a decision in relation to any investment. Any advice contained in this communication is general and has not taken into account the investment objectives, financial situation and particular needs of any particular person.