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If you’re looking for easy, transparent, and low-cost investments, Interactive Advisors claims they have it all.
With a large selection of portfolios created by professional portfolio managers and fees ranging from 0.08 to 1.5 percent of assets under management, there’s something for everyone here, according to IA.
If you’re an existing IBKR client, it’s a no-brainer to partition some of your assets into automated investing taking the pressure off yourself. Don’t worry, you still have a say in what you invest in, it’s just a more laid back experience.
If you aren’t already an IBKR client, Interactive Advisors is best for the experienced investor looking for a little bit of a hands-off approach to investing that can meet the minimum requirements and can afford the fees.
Keep reading to learn my thoughts in this Interactive Advisors review.
What is Interactive Advisors?
Interactive Advisors has a different model than your standard robo-advisor. Rather than setting goals and letting the robo-advisor pick your assets, you invest in a portfolio. You can choose from rules-based portfolios to diversified and asset allocation models.
How does it work?
There are automated portfolios managed by the algorithms and automatically rebalanced and portfolios run by money managers (humans), which cost more. You decide what you want out of your portfolio and they manage the rest.
In addition, clients can upgrade to an Interactive Brokers Universal Account at any time. This account allows you to trade your own assets including stocks, bonds, options, and ETFs at low commission rates.
Like most robo-advisors, you’ll answer questions when you sign up for Interactive Advisors. The questions help IA create your diversified portfolio maximizing profits and limiting your costs based on your goals and risk tolerance. But, it’s not the same as the traditional model. You choose the portfolio manager you want to follow/mimic and your money is invested accordingly.
All you need is $100 to open an account for an automatically managed portfolio, of which there are 50 or more portfolios to choose from. If you prefer a more advanced portfolio managed by a money manager, the account minimums vary at much higher amounts, with the average around $5,000 but go all the way over $100,000.
Deposit and withdrawal
Interactive Advisors offers several ways to deposit and withdraw funds including incoming and outgoing wires, ACH transfers, and mailed in checks.
Please note, you must inform Interactive Advisors when you initiate a deposit or withdrawal so they can watch for the funds and/or honor the request. You’ll see how to do this on your dashboard.
Interactive Advisors is available on web browsers and mobile devices. It works best with large screens, though as they push out a lot of information at one time, which means a lot of scrolling if you’re on a small screen or a mobile phone.
You can open any type of account at Interactive Advisors including individual and joint accounts. They have taxable and retirement accounts, but they don’t have SEP accounts. All accounts are ‘cash accounts’ which means you can use your proceeds of a settled sale immediately to invest in another portfolio rather than waiting the typical 2 days.
Choosing your Portfolios
This is the most important part of IA. You mimic portfolio managers’ investments, but IA limits what portfolios you have access to by using your initial questionnaire. Your risk score from the questionnaire must be higher or equal to the portfolio you’re choosing in order to be eligible. You must also meet the minimum investment amount and have margin permission should you need to purchase securities on margin.
What can you trade?
Interactive Advisors has some of the largest selections of assets/portfolios including:
- Industry leaders
- Undervalued companies
- Growth companies
- Global companies
- Social justice
- Socially responsible *Check out OpenInvest if you are interested in SRI.
- Small or large-cap companies
Interactive Advisors’ costs work a little differently than other robo-advisors, as they have several tiers. On average the fees range from 0.08% – 1.5% per year depending on the chosen portfolio. They charge the fees monthly but don’t charge fees on un-invested cash. As far as fees go, there are certainly cheaper options out there.
- Cash account – You can have a cash account at Interactive Advisors, but they pay very little interest, if any on your balance
- Human advisors – Once you sign up for an Interactive Advisors’ account, you have access to unlimited help from their advisors over the phone
- Customer service – If you have general account questions or need help, you can contact customer service 9 AM – 6 PM ET Monday-Friday
- Education – Interactive Advisors has plenty of articles and videos on their website for educational purposes, but some of the data is outdated.
Interactive Advisors Pros and Cons
Can I invest in multiple portfolios?
Yes, you can invest in as many portfolios as you want, as long as you have the funds. Your Interactive Advisors dashboard will show each portfolio individually as well as an aggregate of all your accounts. Investing in multiple portfolios is nice if you have multiple goals you want to fund and want to keep the funds separate.
Will my portfolio exactly mimic the portfolio managers’ fund?
In some cases, there may be some performance drift. This happens most commonly when you exclude certain stocks from your portfolio that the portfolio manager included. It can also happen if you have a cash flow issue that directs your portfolio the wrong way.
Can I see the available portfolios and their details?
To an extent, you can see the available portfolios before you fund your account. You’ll see a high-level overview of what it entails, but you can’t see actual details until you fund your account and are choosing your portfolio. If that makes you doubt if to invest with Interactive Advisors, take this quiz to see if a different robo could serve you better.
How many stocks does a portfolio contain?
On average, a portfolio has up to 300 different stocks in it because Interactive Advisors invests in fractional shares, giving you a much greater chance at diversification. You can also choose from a large variety of ETFs from Vanguard, Wisdom Tree, and State Street.
Does Interactive Advisors use Modern Portfolio Theory?
Unlike traditional robo-advisors, Interactive Advisors does not use Modern Portfolio Theory. Instead, they follow the portfolio manager’s investments. You can choose actively or passively managed portfolios, but overall, you have the final say eliminating certain stocks from your portfolio or pulling back on aggressive investments when you get closer to your goals timeline.
Can you borrow from your portfolio?
Yes, Interactive Advisors offers both margin lending and loans you can borrow against your portfolio. They offer low-interest rates on both accounts. However, to take advantage of either option, you must have an Interactive Brokers account (separate from IA).
How often are portfolios rebalanced?
The rebalancing frequency depends on the portfolio manager and type chosen. Accounts managed by portfolio managers are rebalanced on an as-needed basis. Other accounts are rebalanced either quarterly or monthly. You can see before you invest how often accounts are rebalanced.
How does Interactive Advisors make money?
Interactive Advisors makes money on the management fees they charge as well as trading commissions on individual assets.
Interactive Advisors vs M1 Finance
M1 Finance works differently than Interactive Advisors. This broker offers commission-free trades that you create in pies rather than choosing prebuilt portfolios. You can choose prebuilt pies, similar to the prebuilt portfolios IA offers or you can build your own.
Like IA, you can invest in fractional shares and you may borrow against your balance. Like IA, you’re in charge of choosing your assets, and M1 manages the portfolio for you. As far as cost goes, though, M1 wins as there’s no management fee or commissions in most cases. If you’re cost-conscious, but are an advanced investor, M1 may be a good choice.
Interactive Advisors vs Betterment
Betterment is generally for beginning investors, but if you have least $100,000 to invest, the Betterment Premium account offers many benefits. Betterment is a more hands-off investment platform, unlike Interactive Advisors.
You can invest in fractional shares, and your portfolio is determined for you based on answers to their initial questions that determine your risk profile and goals. With Betterment Premium, you get unlimited access to certified financial planners, which is nice for investors that want that bit of reassurance that they’re doing things right.
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Worth It or a Scam?
Interactive Advisors is completely different than most robo-advisors out there. It’s worth it if you’re an experienced investor that wants to mimic experienced portfolio managers. You basically mirror everything they do, which is a great way to catch on to different ways of investing. The fees are high, but if you want the experience, it may be worth it.
The fact that IA recently brought their minimum opening balance down from $5,000 to $1,000, it’s much more attainable for many investors, including those that want to try their hand at investing for themselves with still a bit of handholding.
Is Interactive Advisors right for you? Think about what you want. If you’re looking for a robo-advisor that handles everything for you including picking your portfolio, IA isn’t the one.
If, on the other hand, you love the freedom of choosing portfolios, excluding certain assets, and making changes with the reassurance of professional help, IA may be the right choice for you.
Use the following Quiz and find out which robo advisor is best for you.
If you have any questions, please comment below.
Michael is a senior writer at The Robo Investor. He earned his master’s at the Craig Newmark School of Journalism at CUNY, and is currently taking CFP courses at the University of Scranton. He has been an avid finance enthusiast ever since he started investing at the age of 23. Meet the Team