PSA: Stake's 70BPS as their "only" fee is Misleading, USD/AUD "Spot" Rate different for Withdrawal/Deposit

cwongtech on 21/08/2021 - 22:12
Last edited 21/08/2021 - 22:13

Just sharing my observations for the Stake platform…

Some things are not always what they seem.

Stake claims their only fees are 70BPs on the transfer value (let's ignore the 50BPs fee for "express transfers")
Specifically:
"We charge 70bps of the transfer value ONLY when you deposit and withdraw from your account"

By the advertised fees, we would expect to lose a total of 2 x 70 Basis points (so 0.7%) on each direction of transfer.. right?

Let's take $10,000 AUD as a basis, the assumption would be 10k x (0.993 x AUD>USD Spot rate) x (0.993 x USD>AUD Spot rate) because 70BPS conversion loss each time we deposit and withdraw, right? So we should end up with $9860.49 AUD, assuming that the "spot" rate is the same (they claim spot rate, but it appears to be a bid/ask rate with a built in spread already)

I may have misinterpreted but as I will demonstrate below.. it appears the "spot rate" is not the actual spot rate, rather the bid/ask rate.

In other words, the 70BPs as it's only fee is misleading advertising for Stake's platform as its' major "benefit".

Bloomberg Current Spot rate for AUD-USD as of 21.08.2021, 8:20PM AEST
Obtained from https://www.bloomberg.com/markets/currencies

BBG AUD-USD spot rate = 0.7132

Let's try to deposit $10K AUD on the Stake platform at the same time, which yields 7029.30 USD in your account

Stake Deposit $10000 AUD to USD
You Send A$10000
Spot FX rate A$0.7096
FX Fee -US$66.70
You Get (USD) 7029.30

Bloomberg/XE $10000 AUD to USD
AUD A$10000
AUD-USD FX rate A$0.7132
USD Equivalent 7132

Note: $66.70 USD = $93.99 AUD (using Stake's 0.7096 "spot" rate), this represents 94 Basis Points
$66.70 USD = $93.52 AUD (BBG's spot rate)

$7132 (BBG) - 7029.30 (Stake) = 102.70 USD value loss in the "deposit"/ AUD>USD transfer
$7029.30 USD = $9856 AUD (using BBG's AUD-USD rate)

We lost $144 AUD in converting $10000 AUD into USD using Stake's platform for a ONE WAY transfer.

That sounds a hell lot more than 70 BPs! (144 effective BPs actually!)
From the first paragraph where we think we would be losing 70BPs on each direction of transfer, we expected the end value of $9860.49 AUD
From the AUD>USD direction, we're already below our expected value for TWO conversions after only ONE

Let's look at the reverse scenario, withdrawing $10000 USD to AUD

Stake Withdrawal $10000 USD to AUD
Your Withdrawal $10000
Spot FX rate A$0.7171
FX Fee -US$94.00
Processing Fee -US$0.00
You Get (AUD) 13831.97

Bloomberg/XE $10000 USD to AUD
USD $10000
AUD-USD FX rate A$0.7132
AUD Equivalent 14019.884 AUD

14019.88-13831.97 = $187.91 AUD loss
$134.75 USD equivalent (using Stake's "spot" rate)
$134.01 USD equivalent (using BBG rate)

$134.75 USD of $10000 USD lost during the second transfer.

That's almost 135 BPs effective rather than the claimed 70BPs.

The FX fee alone, is 94BPS for each direction!

Can anyone see any flaw in my logic that this is should not be advertised as the "Spot rate"?
Also I can't calculate how the FX Fee ("70 BPs") is even calculated, from the first AND second example, it appears to be 94BPs.

If we are to go back to my original example, of depositing $10K AUD then immediately withdrawing the funds (forex "spot rate" had moved but insignificant)

Stake Deposit $10000 AUD to USD
You Send A$10000
Spot FX rate A$0.7097
FX Fee -US$66.71
You Get (USD) 7030.29

Stake Withdraw $7030.29 USD to AUD
Your Withdrawal $7030.29
Spot FX rate A$0.7171
FX Fee -US$66.08
Processing Fee -US$0.00
You Get (AUD) 9711.63

So a two direction transfer, assuming that the transfers complete in the same instance, with the Stake system of "We charge 70bps of the transfer value ONLY when you deposit and withdraw from your account" yields an immediate loss of $288.37 AUD, or 288 Basis points.
That's very different to the expected 70BPs each direction.

If we do the same experiment for SelfWealth (ignoring "commission-free trading" for Stake)
$10000 AUD converts to $7086.83 USD
$7086.83 USD converts back to $9821.02 AUD
Resulting in a loss of $178.98 AUD compared to $288.37AUD or 178 BPS vs 288 BPS (0.60% claimed per conversion for SW, 0.70% claimed per conversion for Stake)

Stake does have "commission free trading" vs SelfWealth which is a flat brokerage fee of $9.50 USD per trade.

TL;DR

Stake's "spot rate" for deposit and withdrawal are not "spot rate" as labelled, otherwise they should be the same, they're bid/ask rates which means they already have a spread in them.

Their FX fee which is on top of their fake "spot rate" is not 70BPs as claimed either, it's 94BPs each way.

Time to speed-dial ACCC?

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Comments

  • SF3 on 21/08/2021 - 22:20
    -3

    jv-ism is strong in your format style.

    Time to speed-dial ACCC?

    Good luck and why are you so invested?

    • cwongtech on 21/08/2021 - 22:25
      +3

      jv-ism is strong in your format style.

      Just a little bolding, and some tables

      Good luck and why are you so invested?

      Because when investing large amounts, having an undisclosed 144 BPs (1.44%) taken on top of the disclosed 140 BPS from me and other ozbargainers before I even start "investing" doesn't sit right with me?

  • wobblydrow on 21/08/2021 - 23:26
    -3

    Read the disclosure at the bottom of the Bloomberg page, clearly says it's not an actual rate but a composite of the provides who they feed from so you cannot rely on it.
    Spot rates are wholesale rates for typical bank to bank or institution over $500k not you small amounts of 10k

    No issue here just a lack of understanding of spot rates

    • cwongtech on 22/08/2021 - 02:12
      +1

      Spot rates are wholesale rates for typical bank to bank or institution over $500k not you small amounts of 10k

      If you've ever used a Citibank debit card, you'd know that's not true.

      Also, $10K is just an example, my required withdrawal amount is more, so this is a significant amount to me.
      I chose an arbitrary number to illustrate the discrepancy.

      Read the disclosure at the bottom of the Bloomberg page, clearly says it's not an actual rate but a composite of the provides who they feed from so you cannot rely on it.

      I've shown the BBG spot rate is close to the mid-market rates as per XE.com, which my citibank debit card purchases convert very close to.

      So let's say the "spot rate" is correct for arguments sake, how do you explain the $94 USD charged for a $10000 USD withdrawal as the fee?
      The claimed 70 BPS makes no sense at all.

  • netjock on 21/08/2021 - 23:29

    Try it again on a normal working day when FX markets are open in London and compare it to Revolut then you'll know. On weekends even Revolut adds a margin on top.

    • cwongtech on 22/08/2021 - 02:11
      +1

      Thanks, will try that.

      The 70 BPS still makes no sense.

      • netjock on 22/08/2021 - 10:04

        Also read somewhere that 70bps is off the USD rate which means 0.73 is actually 70bps on that not 0.7%. It is more like 1%.

        • cwongtech on 23/08/2021 - 15:38

          You're right that the normal working day the FX is much better.

          The 70 BPs still makes no sense though

          • netjock on 23/08/2021 - 16:00

            @cwongtech: Could you repost the numbers? I want to see what the difference is.

            • cwongtech on 23/08/2021 - 18:49

              @netjock: Hey, the rate updated as per below, unfortunately I already sent through a withdrawal request and can't put 10K USD as the transfer out amount

              I can confirm the deposit and withdrawal spot rates are much closer to what they currently are in Bloomberg/XE

              Stake Deposit spot rate
              Spot FX rate A$1 = 0.7166

              Stake Withdrawal spot rate
              Spot FX rate A$0.7169

              Bloomberg AUD-USD
              0.7167

              XE AUD-USD
              1 AUD = 0.716772 USD

              Compared to the weekend, which was 0.7096 (Deposit) and 0.7171 (Withdrawal), weekday discrepancy is 0.0003, weekend discrepancy is 0.0075 (25x weekday!)

              Also Stake's support team has provided the below link for clarification
              https://hellostake.com/au/blog/stake-academy/stake-academy-f…

              TL;DR, don't transfer out of Stake during weekends.

              • netjock on 23/08/2021 - 21:15

                @cwongtech: Where is the 70bps I wonder? XE is the mid point rate.

                • cwongtech on 23/08/2021 - 22:04

                  @netjock:

                  Where is the 70bps I wonder? XE is the mid point rate.

                  That's a separate thing on the FX fee, I can show you what it says for the deposit but not withdrawal (I don't have enough to withdraw 10K USD anymore, since I initiated a much larger transaction

                  Stake Deposit $10000 AUD to USD
                  You Send A$10000
                  Spot FX rate A$0.7181
                  FX Fee -US$67.50
                  You Get (USD) 7113.50

                  They say to consider it 0.70 USD per $100 AUD converted
                  Thus if we use $10K USD back to AUD, then 13,921.597AUD x 0.70 USD/100 AUD = 97.482 USD~ approximately

  • plmko on 22/08/2021 - 00:01

    Stake is only good when you need to YOLO quickly. Don't expect it to be fair.

    • USER DC on 22/08/2021 - 09:39
      +2

      Stake is a sh*t piece

  • dsar on 22/08/2021 - 11:52

    What's the better alternative to Stake for US Stocks? Genuinely curious OP

  • T-man on 26/08/2021 - 08:44

    Their bs fx convertion rate is the reason why I stopped trading on their platform and closed my account back in February.

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