Interactive Brokers is a publicly-traded company (IBKR-Q), and its online brokerage platform contains several new features, not found in some of the industry’s biggest players. Here’s a review of a very satisfactory experience, although tinged with a certain complexity.
Less known than any other discount broker operating in Canada, Interactive Brokers has a long history. Many wonder if this player, at the heart of several debates, could eventually come to disrupt the online brokerage industry in the country. Because beyond the price war that is currently taking place in this market, it is in the stock trading experience that some firms can come to shake the competition.
Yet, Interactive Brokers' online brokerage platform comes in last in a list of 15 platforms dedicated to online investing. The platforms were ranked by Surviscor based on the fees they charge their clients. Its score of 25% is very far from the three leaders: Desjardins Online Brokerage at 82%, Wealthsimple Trade at 85% and National Bank Direct Brokerage at 95%.
True that Interactive Brokers' fee schedules are complex and much less familiar. But read on to the end: Interactive Brokers is worth a visit for the most demanding investors. Those who want to be able to count on a range of well-developed tools.
How do Interactive Brokers differ from the competition?
And it is precisely where Interactive Brokers makes its competitors bite the dust. There are multiple features: About forty of them are presented on the website, which is also very well done, but in English only. This multiplication of tools goes beyond the usual offer of a discount broker. Unlike larger players, you will find a portfolio creation tool and an asset rebalancing tool.
Interactive Brokers also offers a powerful mobile app for iOS and Android devices. These applications offer continuous data, charting tools, and the ability to carry out the most complex trades; various types of new orders are offered, on a mobile device. And even from the latter, you have access to more than 120 global markets to trade the stocks of your choice. Several local platforms only offer access to the North American market. Now, there are some features that are worth bringing to your attention.
As mentioned earlier, Interactive Brokers clients can invest their money worldwide. Whether you want to diversify into stocks, options, long term contracts, currencies, bonds, or others, you have the choice of more than 120 financial centers to choose from to achieve your goal. Fund your account in multiple currencies to advantageously trade assets denominated in the currency of your choice.
The Fundamentals Explorer tool
This all-in-one fundamental analysis dashboard allows you to quickly view the most important information about a company and its competitors. And this directly from the homepage. See how a company compares to its competitors and the industry, and dive into a wealth of information to make an informed decision.
More elaborate conditional trade orders
Interactive Brokers allows you to place different types of orders. One, the “Bracket order”, is an order that consists of multiple contingencies. With it, you are now able to enter a limit buy order and attach a subsequent limit sell order and a stop sell order to it.
Basically, without any supervision on your part, you could buy the stock that you want at a maximum price of $25 per unit and sell the same stock for $30 as soon as it rises to that threshold. Or you could protect your downside risk by requiring the sale of stocks when it drops to $20, for example. An order, full of possibilities!
Purchase of fractional shares
Wealthsimple Trade is not your only destination for buying fractional shares. Interactive Brokers allows you to choose any available US stock and decide how much you want to invest in it. With fractional shares, you can spread your investments across a larger number of stocks to get a more diversified portfolio. This is the ideal way to make small amounts work quickly, instead of letting them sit as cash!
Responsible Investment Scoreboard
What values do you want to emphasize as part of your investment philosophy? With this dashboard, you can ensure that your current and future investments reflect your values. Based on your preferences, the tool assigns a score that demonstrates how well your investments match your values. You can see if a company's business practices are in line with your values.
Does Interactive Brokers have any weak points?
Like any platform, Interactive Brokers has some weaknesses. The weakness focuses on the complexity of the information. Let’s take a look.
Some types of accounts are not available
For Canadian investors, the Non-Registered Account, Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSPs) are offered. For any other type of account, you will need to turn to another provider.
Complicated navigation and a complex fee schedule
Interactive Brokers has deficiencies in its qualities. For the investor, the abundance of tools and features is appreciated. However, this mass of information cannot be adjusted overnight. It is sometimes difficult to find one’s way around and understand all the ins and outs of a choice of platform or pricing grids. Some access to research also seems to require a monthly subscription.
What are the fees for using Interactive Brokers?
As mentioned earlier, different fee schedules seem to be available for different countries. In Canada, generally speaking, expect to pay $0.01 per stock, for a minimum of $1 per order, and for a maximum of 0.5% of the trade value.
With the exception of young investors and those with significant assets, Interactive Brokers requires account holders to spend at least $10 in commissions each month. If you do not meet this threshold in any month, you will pay an additional fee to comply with this policy.
For example, if you spend $5 on commissions in a month, you will have to pay an additional $5 monthly inactivity fee to bring your total commissions to $10. These fees are waived for account holders with a balance of at least $100,000.
Finally, while many brokers offer free research reports from the firm Morningstar, Interactive Brokers clients must pay, according to some sources, $ 15 per month for this service.
Interactive Brokers: what is the verdict?
One thing is certain, Interactive Brokers stands out from other online brokers. This quality platform, although complex in its rendering, is designed for active investors, margin traders or for savers who have the goals of investing internationally on their own.
Although this online broker offers features that make it stand out, it is not necessarily the interest of the average person to open an account with it. Several online brokers, such as Desjardins Online Brokerage or National Bank Direct Brokerage, will do the job to simply invest at low cost.
What we like about Interactive Brokers
- Robust trading features.
- Opening up to global markets.
- Sophisticated tools for experienced traders.
- The ability to buy fractional U.S. stocks.
- A reasonable transaction commission, even if you prefer a fixed rate.
- The audacity to make people forget more simplistic platforms.
- The ability to open a fictitious account and convert it into a real account.
What we like less about Interactive Brokers
- The pricing schedule is complex.
- The vagueness surrounding the price of certain platforms and features.
- It is difficult to navigate: some will get lost in the maze!
- The website is only in English.