I’m sort of what you guys would call a “retail financial advisor”. My clients have their personal wealth at places like Scottrade, Schwab, Fidelity etc. To put things in perspective, these places charge like 10 bucks to do a trade.
Someone brought " Interactive Brokers" to my attention. The site lists their commission schedule as
Now…let’s assume the typical client has 1,000,000 of investable assets. I use 1% (10,000) to buy Disney at 80/share. That’s 125 shares with a commission of 44 cents… So IB wants 44 cents whereas Schwab wants $9.99?
Have they come up with some freakishly efficient model to lower internal costs or do you CFAs think this is some Bernie Madeoff fraud? Bottomline, would you deposit any of your personal funds at IB?
" Minimum Monthly Activity Fee - as we cater to active traders we require accounts to generate a minimum in commissions each month or be charged the difference as an activity fee. The minimum is $10 per month for accounts maintaining a balance above $2,000 and $20 per month for accounts whose equity has fallen below $2,000."
I use IB and some of my clients do too. They’re legit. You do have to make a minimum number of trades per month or get a fee.
If you are just holding 3 or 4 ETFs and rebalancing annually, then maybe you can save a buck or two by going with a higher commission site, but if you are dollar cost averaging in or out of the account, you are going to be losing more in commissions at other sites than you are likely to be making back by saving on the $10 or $20 fee.
I use IB quite frequently and trade over 90% of my naked options through my IB account. The rest I do through thinkorswim since that is where my IRA is. They are legitimate and their commission model like bchad said is based on volume of trades. A typical retail investor would not benefit. It is targeted towards day traders and more sophisticated product execution with futures/forex/commodities than typical stocks
I have my personal account with IB as well. I love that commissions are generally only $1-2 on the size positions I trade. Not to mention they have good account security and as I just realized doing my taxes, the most user friendly tax documentation I’ve seen. Highly recommend. F paying $7-10 a trade.
Also whatever commissions you incur reduces the monthly fee, so if you have $6 in commissions, the monthly fee is only $4.
The chances of that occurring are next to nothing. I’ve made over 100 deposits/withdrawals to my account and never did I not get my money per their timeframes. However just by taking an educated guess, IB would not be worth it for the majority of your clients. It’s doubtful that they would benefit so much over another trading platform aimed at the mainstream crowd.
Agreed… if you’re running a passive portfolio that’s periodically rebalanced, just go with one of those brokers that charges $3 - 10 a trade. If you’ll be trading on a regular basis, the interface alone in IB is worth it, not to mention the costs structure.
The only scam here is not IB but rather all the other big bank brokers who charge $29 per trade. IB is the saviour of all brokers. I’ve traded with a variety of brokers, and IB beats any other broker by a long shot in most categories.
I get the OP’s concern. IB seems too good to be true, and so one wonders if there’s a catch. After 5 years as an IB client, it still seems too good to be true, but so far, I have no major complaints.
My understanding is that their phone tech support sucks, but it does not seem to be dishonest. That’s just where they’ve decided to save money. In exchange for $1 commissions, there’s a lot of do-it-yourself figuring out. Their support by instant messenger won’t dazzle anyone, but it has been sufficient enough for most of my needs.
Their interface is amazingly professional, once you figure it out (but I can’t seem to get their most recent trader workstation software to download on my mac, which annoys me).
Bumping, as I just moved to IB and am also impressed by their interface…and prices.
I’m using the standard version of TWS on a newish MacBook Pro and it’s working fine (I didn’t download the Beta TWS, as the idea of beta-software and money doesn’t agree with me). It required me to install some Java8 stuff to get it working.
Edit: when applying for an account and logging into the web version DO NOT use Safari. Myself and a client both had issues, help desk says use Firefox. That works fine.