Greetings! It is known that free cheese only comes in a mousetrap. What about discounted cheese? Speaking about taxes, Margaret Thatcher once said: “Better a small piece of a big pie than a big piece of a small one.”
An experienced investor knows: a good broker will not rip off clients with high commissions for services. Better a cent per million than a dollar per hundred. This is exactly the approach of the hero of our today's review. Interactive Brokers reviews and trading conditions.
Why IB?
American broker with reasonable rates.
Transaction fees are among the lowest. Compared to American and European prices. Read below for what and how much you need to pay.
Almost the only broker that opens new accounts for Russians.
Of the already small list of profitable brokers, most have stopped working with the Russian Federation (thanks to sanctions). Or they stopped opening accounts.
Wide range of instruments and countries available for investment:
- access to markets of 31 countries;
- 125 markets for trading;
- 24 currencies;
- a single account for trading worldwide.
Online account opening with support in Russian.
A version of the site is available in Russian (supports multilingualism). Convenient and functional personal account. The first time you even get lost in the possibilities. What Russian brokers offer is like heaven and earth.
Generating various types of reports. Portfolio analytics. Visual graphs and diagrams of investment efficiency. And so on and so forth...
After Kwik, the trading terminal of an American broker looks like something from another planet. To be honest, I didn’t understand much. But he has many possibilities.
Account insurance.
IB is a member of FINRA and SIPC. Without going into too much detail, this means insuring the client's account for $500,000, including $250,000 in cash.
It is important to understand that insurance applies in the event of a broker’s bankruptcy or fraud that results in the loss of investors’ funds.
No one will compensate for direct losses resulting from the client’s trading.)))
Reliability.
The Interactive broker rating from Standard & Poor's is BB+ (stable positive). Higher than Russia's sovereign rating. And as a result, any bank and broker in the Russian Federation.
Reviews
A detailed study of the 16 best US brokers was conducted by experts led by Brandon Reinkensmeyer. They took into account a number of parameters: commissions, tariffs, trading tools and terminals, analytics and support. Based on total points, Interactive Brokers took 6th place.
At the same time, in terms of the quality of order execution, it was among the 2 best. The only complaints that were raised were the quality of technical support, both online and by phone, and the general level of service. By the way, the account management guide, located in the “Training” section, is available only in English under the name “Account management user's guide”.
According to information from the American management company SKI Capital Partners, which has representative offices in Kazakhstan and Singapore, IB uses “price matching” technology. In essence, it does not differ from “kitchen”, which is not prohibited by US law, if it does not imply the so-called. front running, when the broker acts as a counterparty to its client.
Some IB techniques typical for offshore Forex are specified in the client agreement:
The author of the review, Arielle O'Shea, notes the low fees and functionality of the TWS terminal. She points out the complex tariff policy and complaints about technical support as disadvantages.
The forexpeacearmy forum currently has 133 reviews from IB clients, most of them from the US. The average score of their assessments is 2.7. Among the complaints there are many similar to this one:
In this case, the trader discovered that he had an open trade with the Bternt oil futures, although he did not open it. He was able to close this deal only with the help of technical support, which responded only after 10 minutes. Because of this, the trader lost $600.
Some statistics
- Interactive Brokers has been in business for over 40 years;
- IB capital exceeds $7 billion;
- the company employs only 1,400 employees;
- IB shares are traded on the Nasdaq exchange under the ticker symbol IBKR. And they even pay dividends.)))
- more than 600 thousand open brokerage accounts;
- clients from 200 countries;
- the total value of all customer accounts exceeds $128 billion;
- clients make 800-900 thousand transactions daily;
- annual profit from brokerage activities (before taxes) - $1.2 billion.
general information
The Interactive Brokers brand is young: it appeared in 2001. From its inception (1982) to 2001. the company was called Timber Hill. Already in 1983, for the first time in the history of the stock market, it began to introduce mobile computers for trading.
Today, the equity capital of Interactive Brokers Group exceeds 6 billion USD, and the total amount of client accounts is more than 100 billion. The activities of IB are controlled by the supervisory authorities FCA, FINRA, etc. Client funds are protected in the event of bankruptcy of the company.
This protection is a combination of the Securities Investor Protection Corporation (SIPC) and insurance paid by Lloyd's. The total amount of insurance payments can reach $150 million per client. IB consistently occupies one of the first places in the ratings of leading American brokers.
Inactivity fee
The standard minimum fee is $10 per month. Reduced by the amount of trading expenses incurred.
That is, if you spent 7 bucks on transaction commissions, the broker will additionally deduct $3.
If there are no transactions, the fee will still be charged.
Accounts with a capital of more than $100,000 are serviced free of charge.
For investors under 25 years of age, the required payment is reduced to $3. Reduced by the amount of commissions.
For bills under $2,000, the monthly fee increases to $20.
I recommend: How much is it profitable to work with a foreign broker?
The broker does not charge a mandatory payment for the first 3 months.
How to open an account with IB?
Recently I researched the tariffs and conditions of Russian brokers. And he discovered a pattern: to open an account (if you are not an existing client of the bank), most brokers require personal presence.
With IB everything is simpler. Online registration on the website. Filling out the questionnaire (takes about half an hour). And sending the necessary documents: a scan of your passport is required + a bank statement about the movement of funds in your account or a receipt for utility bills.
The account will be opened within 2-3 business days. All that remains is to top it up and start investing.
Software
The company offers the following software:
- TWS desktop platform . By the way, not everyone likes it, but you can simply buy US shares in it, and carry out the analysis in another terminal if the TWS functionality is not to your liking;
- Mobile version of the terminal;
- Web version . In principle, everything is the same as in the desktop version, but does not require installation ;
- Irregular traders are advised to use Quick Trade - it allows you to quickly check your account status or place orders;
- There is an API for clients to develop their own solutions;
- iBot – text/voice module. You can literally trade on the go, giving orders by voice.
The functionality is good on all platforms. Of course, it’s better to choose the desktop version, it’s simply more convenient to work with, and open already planned buy and sell orders through the mobile version if you’re on the go.
Replenishment and withdrawal of funds
Once a month, IB allows you to withdraw money from your account for free. To any bank.
The main thing is that the owner of the bank and brokerage account is one person.
You can top up your account in 21 currencies. The main ones, of course, will be rubles, dollars and euros.
The broker accepts money free of charge. But for the transfer itself there may be commissions from the sending bank.
Currency transfers will cost an average of $15 per transaction. Regardless of the amount.
Advice. It is better to fund your brokerage account in rubles. Through banks that do not charge fees for transfers. And then convert rubles into the currency you need (the same dollars) at the exchange rate. IB will charge $2 for conversion.
I advise: How to top up your IB account in rubles for free
Tariffs and commissions
Interactive broker offers 2 tariffs:
- Fixed;
- Tiered.
Fixed - a tariff with a fixed fee for operations.
More suitable for long-term investors or those who can easily fit into the minimum monthly payment of $10.
The commission depends on the stock market of the country on which trading will be conducted. The lowest tariffs will be on American securities.
The commission for the purchase and sale of securities is $1.
The transaction fee is $0.05 per share, but not less than $1 or 1% of the transaction amount.
For comparison. For a purchase on European exchanges you will have to pay at least 4-5 euros per transaction.
Tariff Tiered.
Fees are charged based on monthly turnover.
At first glance (especially when compared with some Russian brokers), it may seem that the rates for brokerage services are steep. Transaction fee is $1 + mandatory fee of 10 bucks. As a result, the minimum expenses (if within the minimum monthly limit of $10) per year for the investor will be $120.
But in the West, the level of prices is comparable to their standard of living. And IB itself is a discount broker. That is, with minimal trading costs. Compared to competitors.
On the IB website there is a sign comparing commissions with other top players. And the comparison is not in favor of others.
True, I think the broker compares only with those with whom it is convenient for him to compare. But still, the difference in commissions is impressive.
Taxes
When you open an account with IB, you will immediately be provided with a W8-BEN form.
It is needed to avoid double taxation. So that the capitalists do not write off tax from you, then our tax office does not collect income tax at a rate of 13%.
As a result, from the profit received from investments (dividends or when selling securities after growth) in the USA, you will be automatically deducted 10%. You will have to pay the remaining 3% yourself in Russia.
To do this, you need to submit a tax return in Form 3-NDFL at the end of the year. Having previously requested (generated in the broker's personal account) a report.
All profits must be converted into rubles at the Central Bank exchange rate on the date of receipt of profit for each position.
This is of course a bit of a pain in the ass. Especially the first time.
But you can also get a small benefit from such a scheme.
A nice bonus. Russian brokers, being tax agents, calculate and withhold 13% immediately. When dividends or coupons are credited to the account. Or when withdrawing money from your account.
When trading through a foreign broker, you have time until the filing of the declaration (April of the next year). This will allow you to roll over the still unpaid remaining 3% of taxes. And make a little extra profit.
Opening an account
Registration and replenishment of your account usually does not cause difficulties. IB clients can be both individuals and teams, small businesses, as well as professional market participants (investment and hedge funds, etc.). Each group of clients has its own account types. The choice of a specific type is made when filling out an application in the “Open an account” section.
In the application you must indicate your name, password and email address to which a letter will be sent to continue registration. Next, fill in your full name, residential address, telephone number, tax identification number, place of work, etc. This information is needed for Form W-8BEN, a document required by non-US residents to avoid double taxation.
Account verification will require uploading a scanned image of an ID card, as well as a document to confirm the address (bank statement, utility bill, apartment rental agreement).
The base currency of the account is very important. It is recommended to choose the Russian ruble: transferring in rubles is much easier than in foreign currency, and you do not have to deal with the bank’s currency control.
Before you transfer money, remember: one-time transfers of more than 600 thousand rubles, as well as repeated transfers from the same bank for a total amount of more than 600 thousand rubles. will attract the attention of tax authorities.
If this is not desirable, you can top up your deposit from different banks. In order for funds to be credited to your trading account, you need to fill out a deposit notification in “Account Management”. After this, the client receives payment details. This and other general information is available in the “Trade” section in the “Financing Help” section.
IB is not a Russian tax resident, so clients are required to file their own tax return. To do this, they will have to take into account all types of income received in IB: profit from asset transactions, dividends, bond coupons, etc. The broker provides the necessary reports in both Russian and English.
