How Interactive Brokers attracts RIAs from rivals
What do you want to know
- Interactive Brokers continues to grow and add new RIA customers by differentiating itself from its competitors.
- Easy access to crypto and stocks outside the US is one of the main ways to attract RIAs.
- In some cases, investors will transfer part of their investments to Interactive Brokers to access crypto and transfer all of their assets to the brokerage later, an executive has said.
Interactive Brokers attracts RIAs to its platform with a number of features that set it apart from rivals like Schwab, according to Steve Sanders, executive vice president of marketing and product development at the electronic brokerage firm.
These areas of differentiation start with its use of automation, but also include the easy way it allows RIAs and other clients to invest in stocks around the world and now in cryptocurrency, it said. he told ThinkAdvisor in a recent interview just before the company’s earnings announcement on Tuesday. for the first quarter ended March 31.
“We have 5,884 advisors registered on our platform,” Sanders said, referring to the count at the end of its fourth quarter. The company also has 17,610 of what it calls “friends and family advisers” – those with around 15 clients or less – as well as advisers who are not yet registered and individual investors who simply want to manage all accounts. of their family, he added.
Assets under management by RIAs alone reached $42.3 billion in the fourth quarter, up 14% from a year earlier, he told ThinkAdvisor. “Even with a declining market, it grew,” he noted.
Comparable first-quarter data was not immediately clear.
The total number of customer accounts rose 36% to 1.8 million in the quarter from 1.3 million a year ago, chief financial officer Paul Brody told analysts on the earnings call. tuesday. Client assets increased 8% to $355.9 billion from $330.6 billion. The company’s headcount at the end of the first quarter was 2,683, Brody said.
Automation and crypto
“We usually automate everything,” including flexible customer billing, Sanders told ThinkAdvisor. From the start, this has helped Interactive Brokers attract RIAs and other advisers of all sizes, including “very large advisers or people who are just starting out with a few clients,” he said.
Echoing this on the company’s earnings conference call, Brody said, “Automation remains our primary means of maintaining high margins as well as ongoing expense control as we hire talented people and invest in the future of our business.”
The company doesn’t have account minimums, and there are “no huge markups, so for small to medium-sized advisors, we’re still a good place,” Sanders told ThinkAdvisor, adding that large custodians charge customers more “because their processes are more manual.”
Plus, “we don’t have any minimums, custodial fees, or anything else” along those lines, he explained. “So it’s number one in terms of competitive advantages in the advisor space.” And “our pricing is very transparent,” he said, noting that it’s “still on our website.”
Meanwhile, the firm’s Universal Accounts allow advisors “to invest or trade stock options, currency futures, bonds, ETFs and funds, and now crypto,” that that Interactive Brokers recently added, he pointed out. “I think we’re one of the only custodians that really offer this to advisors, at least that I know of.”
Using the Interactive Brokers online platform, advisors can trade all of these products from “the same screen, all integrated together – and not just in the United States, but they can trade all of these products… anywhere in the world,” he said, noting the company. continues to develop its bond market.
With Universal Accounts, Interactive Brokers customers can deposit their local currency, then, “say you’re sitting in the US and you want to trade UK or Hong Kong stocks, you can either convert the US dollars into pounds and then buy the UK stocks, or you can take out a secured loan against your US dollars at the lowest possible rates and we will lend you the pounds to buy the UK stocks,” he explained.
Another aspect of the company’s strategy that clients appreciate, he said: “We are not in competition with our advisors. This is an important point. We don’t have our own advisers. We are not trying to compete. What we’re hearing more and more from people coming in is that they’re concerned that some of the top goalies are doing this.
Interactive Brokers, meanwhile, provides “what I consider to be the largest agnostic mutual fund marketplace because we don’t offer our own mutual funds,” he pointed out.
Interactive Brokers also offers free tools, including its own portfolio analysis and an integrated customer relationship management system that it says “makes life easier” for clients using its platform.