Low costs and sophisticated trading tools are crucial for experienced investors, and Interactive Brokers doesn't disappoint on either count.
New features and services released late last year such as IBKR Lite, a bond scanner and fractional shares helped Interactive Brokers secure a top five finish for Overall Customer Experience in IBD's eighth annual Best Online Brokers awards. The survey results can help investors interested in an Interactive Brokers review.
Besides making the top five overall, Interactive Brokers excelled in some specific areas. It placed among the five Best Online Brokers in nine of 15 categories, with its highest scores in Low Commissions & Fees, Website Security, Broad Choice of Investments, Mobile Trading Platforms/Apps, Options Trading Platform and Portfolio Analysis & Reports.
The awards are strictly based on customers' ratings. For the survey, IBD partnered with polling firm TechnoMetrica Market Intelligence to ask more than 4,000 investors to rate their primary online broker's performance in 15 categories. The categories were determined by a separate survey in which more than 1,000 investors rated the importance of various broker attributes.
- View The Full Best Online Brokers Special Report
- See Lists Of The Best Online Brokers Overall And In Every Category
- Get Details On The Survey Methodology
"Interactive Brokers is the professionals' gateway to the world's markets," Steven Sanders, executive vice president of product development and marketing, told IBD via email. "Our mission has remained the same for over four decades. We focus on providing the best pricing, sophisticated technology and breadth of product around the world."
Interactive Brokers Review: IBKR Lite
With the ongoing price wars among brokers, Interactive in October launched IBKR Lite, which offers unlimited, commission-free trades on U.S.-listed stocks and exchange traded funds. IBKR Lite has no account minimum requirement or activity fees and includes free market data on U.S. stocks. IBKR Lite clients get access to Interactive's three major trading platforms: TraderWorkstation, Client Portal and IBKR Mobile app.
The existing service was rebranded as IBKR Pro, and clients can switch between the two service levels. So, what's the difference?
"Our IBKR Pro plan is specifically designed for sophisticated investors and provides the lowest-cost access to stocks, options, futures, forex, bonds and funds on over 125 markets in 31 countries," Sanders explained. "Our Trader Workstation is consistently rated among the most sophisticated trading platforms and our award-winning IBKR Mobile app ... lets investors trade anything, anywhere."
IBKR Pro users can also save money, since their orders are routed using IB SmartRouting. That gave clients a price improvement of 43 cents per 100 shares compared with the industry average, according to IHS Markit. Based on the clients' average trade size, Sanders notes, that translates into a savings of $4.64 per trade net of commissions.
"Sophisticated investors comprehend that these savings significantly outweigh the money saved on so-called 'free commissions' and the more active the investor, the more they are likely to save," he said.
Bond Scanner
Also last year, Interactive launched Bond Scanner, which lets users view the broker's inventory of more than 42,000 global fixed-income products. Bond Scanner compares Interactive's prices with other brokers and is available with no charge to both clients and nonclients.
"It will now be simple to see how the low commissions we offer on fixed-income products compares to the competition," Sanders said. "With Interactive Brokers, there are also no hidden fees or markups, common elsewhere."
Fractional Shares
In November, Interactive began giving clients the ability to trade stocks using a cash quantity, or fractional shares. That means clients can place orders in a specific dollar amount, say $1, $100 or $10,000, instead of a specific number of shares. So if the dollar amount doesn't equal a whole number of shares, fractional shares will be bought or sold.
"Clients can now easily place orders in dollar amounts using our cash quantity orders," Sanders said. "Fractional shares can help clients invest in stocks with a small dollar amount and diversify as they can buy slivers of shares."
Mobile Trading Platform/Apps
Driven by its Trader Workstation (TWS), Interactive's trading platform can be accessed via the client portal, desktop (Desktop TWS) and mobile devices (IBKR Mobile). IBot, the artificial intelligence solution developed by Interactive, helps traders manage their accounts.
The online broker's popular mobile app, IBKR Mobile, picked up several new or beefed-up features during the year including FX Converter, environmental social and governance scores, more courses for Traders' Academy, and Fundamentals Explorer, which gives users access to stock data from Refinitiv and analyst ratings from TipRanks.
Low Commissions And Fees
As mentioned earlier, IBKR Lite clients get unlimited commission-free trades in U.S.-listed stocks and ETFs. At the fixed price level, IBKR Pro users pay a half-cent per share, which works out to a $1 commission on 100 shares. The minimum commission is $1 per trade.
There is no minimum to open an account. Interactive Brokers in 2018 removed the $10,000 account minimum. IBKR Lite clients pay no maintenance fee. IBKR Pro clients with an account under $100,000 in average equity for a calendar month must spend at least $10 in commissions or will be charged a monthly activity fee.
Interactive Brokers Review: History
Interactive Brokers' history dates back to 1977, when founder and Chairman Thomas Peterffy bought a seat on the American Stock Exchange. Headquartered in Greenwich, Conn., the broker now has more than 1,400 employees globally, including Canada, the U.K., China, India and Japan. It has over $7 billion in equity capital and executes more than 850,000 trades per day.
At the end of last year, Interactive had 690,000 client accounts, a 15% year-over-year increase. Client equity was $174.1 billion, up 36% from the prior year.
Follow Nancy Gondo on Twitter at @IBD_NGondo.
