Fractional investing in Belgium: owner or creditor?

What is fractional investing?

Fractional investing is a mechanism that lets you buy a portion of a stock or an ETF. Rather than waiting to save up the €500 needed, for example, for one full share of an ETF tracking the S&P 500, you invest a smaller amount in a fraction of that share. Every euro goes to work immediately, and diversification becomes accessible on any budget.

The promise is tempting, and the question deserves to be asked: what do you actually own when you invest this way?

Buying a fraction of an ETF doesn't make you the owner of the ETF itself. It makes you the holder of a new financial instrument, created and managed by a broker, whose value tracks that of the underlying ETF. The FSMA, Belgium's financial markets regulator, formalised this in a communication published in March 2023: in most cases, a fractional investment forms a separate instrument, with legal and economic characteristics substantially different from those of the original share or ETF. Buying a fraction means signing a contract, not acquiring a security.

Fractional investing: two models, very unequal protections

The FSMA identifies two main structures on the Belgian market.

In the first model, the broker buys the underlying shares and books them on its own balance sheet. It then issues an individual contract to the investor, whose value proportionally reflects that of the ETF. In practice, the investor isn't a shareholder: they're a creditor of the broker. If the broker fails, the underlying assets go into the pool shared among all creditors. Getting your money back is far from automatic.

The second model, co-ownership, is structurally more solid. The underlying shares sit with an independent custodian, legally separated from the broker's balance sheet. Trade Republic and Revolut use this model for their Belgian clients. Here too, the FSMA notes that if any link in the chain runs into financial trouble, investors could face operational problems accessing their fractional shares. The law firm Loyens & Loeff points out that a fractional investment creating a separate instrument offered to the public in Belgium must, in some cases, be accompanied by a prospectus or information note, an extra regulatory requirement few investors anticipate.

Both models also share certain limits: holders of fractional shares get no voting rights on the underlying shares. They can't transfer their positions to another broker. If they want out, they must sell the fraction back to the broker they bought it from, outside the open market.

The main platforms active in Belgium:

The lesser-known risks of fractional investing

Counterparty risk and operational uncertainty aren't the only realities worth knowing.

The liquidity of fractions doesn't compare to that of the underlying ETFs. An investor in a listed ETF can sell it at any time on the secondary market, at market price, through any intermediary. An investor who bought a fractional share can only sell it back to the issuing broker, on that broker's own buy-back terms.

What's more, the spread between the buy and sell price of a fraction doesn't necessarily match that of the underlying ETF. Commissions vary widely between platforms, and when the amounts invested are small, precisely the case with fractional investing, they can weigh proportionally far more heavily than expected at the outset. ESMA has in fact required intermediaries to clearly disclose all these costs, margins and spreads relative to the market price of the underlying share, a sign that Europe's regulator already viewed this opacity as a problem.

Why Easyvest favours whole ETF shares

At Easyvest, portfolios consist of whole ETF shares, held in the client's name in a segregated account with a Belgian custodian. Your securities remain recoverable from the custodian under any circumstances.

Matthieu Remy, CEO of Easyvest, sums up the reasoning:

“With fractional investing, you introduce a counterparty risk that sits with the broker or intermediary. It's the intermediary that splits the ETF share on its own balance sheet. If that intermediary fails, getting clients' money back becomes very complicated. It's a risk we don't want to expose our clients to, so we prefer to invest in whole ETF shares.”

This caution doesn't mean giving up what makes fractional investing attractive: investing modest sums without delay. At Easyvest, almost all of every deposit goes to work as soon as it arrives: cash holdings are capped at 1%, reserved to cover management fees. The choice of ETFs plays a big part in this: Easyvest selects funds whose unit price stays reasonably low, which makes it possible to buy whole shares even with modest amounts.

The minimum amount needed to start investing therefore stays within reach, without resorting to fractions. Easyvest has built a simulator that shows, in a few clicks, how a portfolio of whole ETF shares can grow over ten, twenty or thirty years, based on each investor's horizon and goals: Simulate my portfolio →

Frequently asked questions

Is a fractional share really a title of ownership?

Not necessarily. According to the FSMA, in most cases it's a separate financial instrument, not the share itself.

Which brokers offer fractional investing in Belgium?

Trade Republic and Revolut, both from €1, on a co-ownership model. DEGIRO, Bolero and Keytrade only offer whole shares.

Can you transfer a fractional share to another broker?

No. Fractions can't be transferred to another intermediary, and carry no voting rights.

The question to ask before choosing fractional investing

The relevant question isn't whether a broker offers fractional investing, but what exactly you own at the moment of purchase, and what happens if that broker runs into trouble one day.

Investing for the long term, in a diversified way, doesn't require fractional investing. At Easyvest, once your account is open, you fund it every month: your money is invested in a portfolio of whole ETF shares, following a plan calibrated to your horizon and your goals.

Sources: FSMA, “Classification of fractional investments” (2023) · ESMA, “Public Statement on fractional shares” (2023) · Loyens & Loeff, “Fractional investments — key takeaways” (2023)