Interactive Brokers rating

Interactive Brokers Cons and Pros (2021)

Interactive Brokers pros and cons, benefits and downsides, perks offered. Is IB good or bad? Interactive Brokers individual/joint account advantages and disadvantages for 2021.

Interactive Brokers Pros

  • Interactive Brokers is a deep discount brokerage firm that targets a customer base of very active traders and hedge funds. Its main advantage is very low commission on options and futures trades
  • IB is known for offering one of the most sophisticated and powerful professional trading platforms (called Trader WorkStation) on the market
  • The firm has some of the best published margin interest rates
  • Another one of Interactive Brokers pros is access to about 100 markets worldwide
  • The firm offers huge selection of various products for trading
  • $0 minimum to open an account

Interactive Brokers Cons

  • The firm only wants active traders as customers. Therefore in IBKR Pro pricing plan it has a $10 per month minimum commission requirement to avoid $10 monthly fee (rises to $20 monthly if account balance is less than $2,000; waived for $100,000+ accounts)
  • There is also a $10 monthly charge for the basic market data feed. Most brokers don't charge for this
  • The company has a $7.50 quarterly fee for all IRA accounts, which comes to $30 per year
  • Interactive Brokers has a very complicated fee structure, and listing of all their fees takes dozens of pages on their website
  • Their trading platform, Trader Workstation, is designed for professional traders and therefore is not intuitive and difficult to learn for beginners
  • While their pay-per-share commissions are very cheap for small size trades (up to 1,000 shares), it becomes expensive to make trades with over 1,600 shares
  • There are lots of customer complaints about snobby customer service - the firm expects clients to be experienced and self-reliant, and doesn't do any hand-holding
  • Interactive Brokers is notorious for lightning speed same day margin calls and margin tightening at the worst possible time, not giving clients a few days to add funds like most other brokers do
  • While users could invest with as little as $100 in mutual funds with most brokerage firms, with IB minimum size on initial mutual fund order is $3,000 (subsequent order size, however, drops to $100). Also, only no-load funds and short term redemption fee funds are offered
  • And final Interactive Brokers con is that there are frequent technical problems with trading platforms and their website

Interactive Brokers Review

Read complete Interactive Brokers review and Trader WorkStation review

Interactive Brokers is a leading player in the discount brokerage business and is a respectable, reputable company. All investments have risks, especially equities, and the only investments that are safe from the standpoint of protecting principal are FDIC insured deposit accounts found in banks.

Individuals should investigate Interactive Brokers completely before opening an account, due to the sophisticated nature of its trading platform. The company may only be suitable for professional traders and active investors, but it is as safe and legitimate as any major online broker is.

Opening an Account at IB

For U.S. based traders and investors, there are a lot of options to choose from when deciding on a discount broker. The decision often comes down to the level of complexity required by the customer. For example, some discount brokers target their services primarily to the retail investor or trader. These brokers offer the standard suite of tools that allow investors to buy and sell investment products at a much lower cost than a traditional full service broker. Another subset of discount brokers tailor their suite of platforms and services to more sophisticated and experienced traders and investors. That is where Interactive Brokers likes to play; their platforms and services have a more professional level of client in mind.

Discount brokers have come a long way with respect to the ease and support available when setting up an account. It used to be that the process was onerous and complicated, with multiple forms and signatures required to get everything set up properly. Nowadays, the account set up process is typically done completely online with an easy to walk through process. However, as Interactive Brokers is geared towards traders and investors who have a slightly higher sophistication levels, there is limited support for potential customers during account setup. It seems that the company’s expectations are that you will be able to complete the process all online and understand the forms you need to fill out with minimal support and guidance from them. This is not to say that support is not available. Support can be obtained via phone or chat, however the whole signup process is not as intuitive or easy to follow as it is with some other brokers. The language used and guidance provided is simply not laid out as well as it could be.

One of the worst things about Interactive Brokers account opening process is that it is very long - depending on the customer it could easily take one or two weeks. Once signup is complete, funding can start right away which means trades can be entered usually within a few days after account opening.

Interactive Brokers Pros and Cons

Account Types

There are several different account types that can be setup at Interactive Brokers. The company offers accounts geared towards retail (non-professional) traders and investors, as well as accounts specifically tailor to professionals such as money managers, brokers, and hedge or mutual funds. Since this website is geared towards helping retail investors and traders choose the best broker, this review will only discuss accounts that meet those needs.

As a retail trader or investor, the types of accounts that can be opened include the following:

Individual – an account used by one trader or investor

Joint – an account used by two individuals (i.e. husband and wife)

Trust – an account that registers the securities in a living trust as part of an estate plan

IRA – an Individual Retirement Account

UGMA/UTMA – an account that is used for minors as part of a custodian agreement

Most traders and investors will choose either an individual or IRA account, however it is good to know that the other options are available if required.