Interactive Advisors, a service offered by Interactive Brokers (IBKR), offers among the widest range of securities to choose from, in addition to placing a special emphasis on socially responsible investing products. That's why we have named it the best for both portfolio construction and sustainable investing.
Interactive Advisors also offers a variety of price points appealing to customers at all levels. At the lower end of the cost scale, you will find rules-based automated portfolios from the firm’s Smart Beta (0.08% management fee), Diversified (0.20%), and Asset Allocation models (0.12%), while actively managed portfolios run by money managers are at the higher end of the range (0.50% to 1.5%). Portfolios invested according to ESG strategies, including some of the Smart Beta portfolios, are marked in the list with a green leaf. Existing IBKR customers can partition a portion of their existing portfolios and invest in one (or more) of those offered.
New and Notable Updates
- The portfolio selection process has been enhanced with a series of questions in plain English. If you click on "Explore Portfolios" you can go through choices such as, "How can I invest in undervalued companies?" and "How can I invest in Smart Beta portfolios with a social edge?"
- If you choose Socially Responsible Investing, you can block individual firms and groups of firms that do not share your values.
- There is a tool that helps you understand the cost of excluding companies that do not share your values. The freed-up cash is invested in the rest of the portfolio.
- Interactive Advisors is our best robo-advisor for sustainable investing and portfolio construction.
- These portfolios can be customized extensively.
- Fees charged depend on the advisor you choose, and can range from 0.08% to 1.5%.
Portfolios managed by Interactive Advisors, of which there are approximately 50, can be opened with a minimum balance of $100, making these more complex offerings available to a wider range of customers. The 27 portfolios managed by boutique money managers have varying minimums, some as high as $120,000, though most are in the $5,000-$20,000 range.
IBKR got into the robo-advisory space in 2015 when the company purchased Covestor, which allowed investors to follow an advisor and mirror the advisor’s trades. Covestor had been executing trades on IBKR’s platform since its launch to the public in 2007. Following the Covestor acquisition, the service was renamed, and it was relaunched in 2019 as Interactive Advisors.
Wide range of portfolios offered.
Most portfolios include baskets of stocks rather than ETFs.
Actively managed portfolios are run by boutique wealth managers. Clients mirror their trades.
The PortfolioAnalyst tool lets you consolidate and track all of your financial accounts.
Customers can borrow against their non-managed accounts at relatively low interest rates.
Some of the actively managed portfolios have very high minimums.
The process of opening and funding an account is more difficult than at other robo-advisories.
Not immediately obvious what your actual costs will be.
You need a large account and a high cash balance to earn interest on idle cash.
If you aren’t already an Interactive Brokers customer, you’ll go through a short questionnaire to open your account. You can browse through some high-level overviews of the 80+ available portfolios but you can’t see the details until your account is funded. You can, however, see performance statistics for any period you choose while browsing portfolios without logging in. Setting up an Interactive Advisors account involves opening an Interactive Brokers account if you're not already a customer. You don't have to use the active trading platform, but many of the tools are available to you.
You can view the available portfolios, including 13 with ESG themes, by scanning through risk scores or providers. If you’re logged in, you can see the current contents of each portfolio as well as recent transactions made by the portfolio managers.
Portfolios include Thematic Disruptors portfolios from Global X, and a line-up of ESG Smart Beta models. You can invest in multiple portfolios as long as you fulfill the minimum deposit requirements.
Interactive Advisors has enhanced its goal setting and tracking tools, but they're still less complete than those offered by, say, Wealthfront or Betterment. Right now, you define your own goals and timing for their achievement and you’ll be able to see projections of the likelihood of their attainment. Goals other than retirement and college planning are assumed to have a date on which all the funds will be taken out. College planning assumes four equal annual withdrawals over four years. The recently-added Goal Tracking tool lets you visualize your progress towards your financial goals.
Clients can use the IB Investors’ Marketplace to search for financial planners and professionals.
Interactive Advisors is among the handful of robo-advisors that offers margin lending as well as loans against the value of your portfolio, although both of these require a regular Interactive Brokers account in addition to the advisory account. If you own more than 100 shares of an individual stock or ETF, you can participate in Interactive Brokers’ stock loan program, which can generate some passive income on your holdings.
Interactive Brokers’ PortfolioAnalyst feature lets you consolidate all your financial accounts in one place so you can get a picture of all of your assets. You can see summary values for each individual financial institution or consolidated across all financial institutions and different time periods, including current and prior balances, returns and percent change in value. You can also compare your returns to over 200 benchmarks or create your own. Again, you do need to have a separate Interactive Brokers account to access this tool.
Clients that also have a full Interactive Brokers trading account can use the company’s bill pay service and debit card, but there is no checking account available. Interest rates for cash balances are very low. You can earn some interest on the cash in your account, but there are multiple restrictions that will keep small balances from earning anything.
- Individual stocks: Most portfolios contain fractional shares of individual stocks. Some portfolios have up to 300 stocks.
- The platform offers ETFs from Vanguard, Wisdom Tree, Legg Mason, State Street, and others.
- Socially responsible portfolios consist of stocks, not ETFs, and can be extensively customized.
You can choose socially responsible portfolios from among the offerings or find the appropriate exclusion group to avoid companies that do not share your values, as well as single stock exclusions that automatically apply to all your investments. Each exclusion group typically comprises 25 stocks and is reviewed annually. The exclusion groups include:
- Animal testing
- Business ethics controversies
- Corporate political spending and lobbying
- Energy intensive
- Fossil fuels
- Greenhouse emissions
- Hazardous waste
- High water usage
- Tobacco, alcohol, and gambling
- Weapons and gun manufacturers
If there is a company not on one of these lists that you want to avoid, you can enter the ticker symbols you want to exclude from any portfolio that contains individual stocks. You can then look at historical portfolio returns without the excluded companies. This is a unique feature.
There are also portfolios that follow certain market sectors, including real estate, consumer discretionary spending, and utilities. This allows investors to take sector positions, which is something not many robo-advisories offer. You can also invest in a general global portfolio that includes equities and fixed income from across the globe. This level of portfolio customization is rare within the current robo-advisory industry and it is one of the main reasons that Interactive Advisors may be a better fit for well-informed investors who want that level of control.
Actively managed portfolios are rebalanced based on the portfolio managers' decisions. The more passively managed portfolios are rebalanced quarterly for most portfolio families and monthly for the State Street Global Advisors portfolios. You can see how your portfolio is performing, along with its asset allocation, on the website or on your mobile device.
Interactive Advisors is essentially a mirroring service that allows you to follow a portfolio manager. This is a fundamentally different offering than other robo-advisors that run algorithms based on Modern Portfolio Theory (MPT) to manage your portfolio. The rebalancing is ultimately based on the corresponding actively or passively managed portfolio, so you will still need to do some aspects of portfolio management for yourself, such as backing out of the riskier investments as your investment time horizon nears.
Every portfolio offered by Interactive Advisors has a performance summary that you can examine. Of the three portfolios we looked at, all outperformed the indexes chosen for comparison by a considerable margin. Each portfolio description includes a great deal of performance detail.
An Interactive Brokers feature currently in beta test, the Impact Dashboard, is available to Interactive Advisors customers via their brokerage account, and is designed to help clients evaluate and invest in companies that align with their values. Socially responsible portfolios are included in the portfolio review features. The Impact Dashboard allows investors to select their personal investment criteria from 13 impact values and principles including Clean Air, Pure Water, Ocean Life, Land Health, Consumer Safety, Ethical Leadership, Gender Equality, Racial Equality, LGBTQ Inclusion, Company Transparency, Sustainable Product Lifecycle, Mindful Business Models and Fair Labor & Thriving Communities. Clients can also exclude investments based on 10 categories: animal testing, business ethics controversies, corporate political spending and lobbying, energy-intensive, fossil fuels, greenhouse emissions, hazardous waste, high water usage, tobacco, alcohol and gambling, and weapons and gun manufacturers.
The Interactive Advisors website is mobile responsive, so you can log into it from a browser on your device and have the exact same experience that you’d have on a desktop computer. We had some issues accessing online chat on the mobile web (though not on the desktop). The Interactive Brokers native mobile apps for iOS and Android do not allow access to Interactive Advisors in its current incarnation, though customers who also have a regular trading account with IBKR can see their robo portfolios.
The website looks and performs best on very large screens. On a notebook computer, we had to do a lot of scrolling around to see the information displayed. Sorting through the many portfolios takes some diligence as you are initially presented with the actively managed, and higher cost, selections first. You have to go back to the menu and choose a different portfolio style to see the choices that incur fewer fees.
Every portfolio offered by Interactive Advisors has a performance summary that you can examine. Each portfolio description includes a great deal of performance detail.
Interactive Advisors offers live online chat for prospective and current customers. Customer service is available for Interactive Advisors-related issues 9 am to 5 pm ET, Monday through Friday. There is 24/6 customer service for existing Interactive Brokers clients. Several questions posed during the review process were answered within an hour by email.
Education & Security
You’ll find articles and videos on the Interactive Advisors blog pages that are interesting and nicely laid out. The “Outlook” section of the SmarterInvesting site, which is devoted to topics of interest to Interactive Advisors customers, is extremely out of date, however.
Interactive Brokers was one of the early adopters of tight security measures. The website and mobile apps are encrypted.
IB carries excess SIPC insurance on all accounts, up to an additional $30 million (with a cash sub-limit of $900,000) subject to an aggregate limit of $150 million. Futures and options on futures are not covered.
Commissions & Fees
Since there is such a wide range of fees charged, you may have to break out a calculator to figure out your actual costs, though you can take a shot at it by using the Interactive Advisors costs breakdown tool. The least expensive portfolios incur a 0.08% annual management fee while the most expensive carry a 1.5% fee. The higher cost, actively managed portfolios have much higher minimums for participation, so they are not included in the $5,000 portfolio.
- Monthly cost to manage a $5,000 portfolio: $3-$8
- Monthly cost to manage a $25,000 portfolio: $15-$250
- Monthly cost to manage a $100,000 portfolio: $65-$125
Is Interactive Advisors Right for You?
This set of portfolios is among the most complex that we saw during our review process. The recent change from a $5,000 minimum to $1,000 might intrigue new investors who want to dabble in international assets. For investors who know their way around how index funds are constructed, IB’s robo-advisory service offers a sophisticated way to be automatically invested.
Investopedia Robo-Advisor Rating Methodology
Investopedia is dedicated to providing investors with unbiased, comprehensive reviews and ratings of robo-advisors. Our 2020 reviews are the result of in-depth evaluations of over 20 robo-advisor platforms, including the user experience, goal-setting capabilities, portfolio construction, costs and fees, security, mobile experience, and customer service. You can read our full robo-advisor rating methodology for a much more in-depth explanation than the summary below.
Overall Star Rating Explained
With the individual investor in mind, we took a critical look at the services and technology provided by robo-advisors. We organized our methodology into nine categories, scoring each advisor across multiple variables to rate performance in every applicable category. The score for the overall award is a weighted average of the categories.
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The Review Process
To evaluate these platforms, we sent questionnaires with over 100 queries to the participating robo-advisories. Most of the companies we reviewed gave us socially-distanced video demonstrations of their platforms and services during August 2020.
From the questionnaires, the hands-on testing of the platforms, and the platform demonstrations, we scored each category and then combined the category scores into an overall rating for each robo-advisor. Each category covers the critical elements users need to thoroughly evaluate a robo-advisor.