IBKR offers global access with local benefits for ISA holders

“Investing through an ISA is one of the strategies that can mitigate inflation and help investors keep one step ahead of inflation and safeguard savings,” Gerry Perez, chief executive at Interactive Brokers (UK) told BrokerChooser, adding that Interactive Brokers’ clients, can trade stocks and ETFs on over 90 stock exchanges worldwide through their Individual Savings Accounts (ISA). We at BrokerChooser want to help you make sense of the complicated financial world, so we wanted to find out from Perez what makes Interactive Brokers so attractive when it comes to offering ISA accounts to UK residents. Find out what he told us!

What are the benefits of holding an ISA account besides tax relief?

There are many benefits to investing in a stock and shares ISA account beyond the current tax benefits. For example, investors seeking diversification can invest in global stocks, shares, and other products, which opens more investment opportunities and can mitigate risks. 

Historically, ISA investing in global stocks and other products has been costly and limited. However, Interactive Brokers offers investors the opportunity to invest in global stocks and ETFs through ISA accounts at low commissions. 

Clients of Interactive Brokers, through their ISA accounts, can trade stocks and ETFs on over 90 stock exchanges worldwide, including North America, Europe and Asia. In addition, Interactive Brokers offers very competitive pricing and several trading platforms designed for a wide variety of investors. 

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Inflation is a big worry on everyone’s mind. How do ISAs, and particularly Stocks and Shares ISAs, fare in this high-inflation environment? Are they still a good way to save and invest?

While inflation may impact the purchasing power of money, Stocks and Shares ISA accounts are still a good way for investors to invest and save. In fact, investing through an ISA is one of the strategies that can mitigate inflation and help investors keep one step ahead of inflation and safeguard savings. 

ISA accounts, for example, let clients invest in stocks that generate dividends regularly. In addition, clients of Interactive Brokers can invest in stocks and ETFs worldwide through ISA accounts and some of these investments might be more resistant to inflation than cash.

It is important to note, however, that investing in stocks and shares through an ISA or a General Investment Account carries risk to the capital invested in addition to the potential for return. Funds can fluctuate with stock market activity and for this reason, it is necessary for investors to educate themselves about the markets, trading and Interactive Brokers’ platforms and tools. 

We see that Stock and Shares ISAs are really popular, do you think that the inflation worries add to this popularity? What are other reasons in your opinion?

Regardless of the market cycle, investors should always evaluate the costs and fees of maintaining an ISA, or any other account. Interactive Brokers offers clients low and transparent commissions so investors can compare our offering transparently, the ability to earn GBP 3.449% on any uninvested GBP cash balance above £8,000 [as of the 7th of March 2023] and no custody fees. Overall, we aim to maximize investor profits and minimise costs. 

We provide access to expert trading tools that help mitigate risks and provide additional advantages over other ISA providers. However, please don't take my word for it. I suggest prospective customers compare us against the competition and make their own decision. 

Do you see other asset classes, besides stocks, gaining in popularity due to rising inflation, and increasing interest rates? Bonds for example? Are mutual funds popular with ISA holders?

We are seeing a rise in ISA customers seeking to trade global ETFs. We offer a global offering of ETFs to complement our broad coverage of worldwide stocks. Moreover, we price our ETFs as our shares, so clients can benefit from our low commissions. In the near future, we intend to offer mutual funds at low costs in our ISA accounts.  

Do you think the government will raise the annual allowance from £20,000 any time soon? Do you think it would be necessary to raise the limit?

Anyone seeking to save more money each year would benefit significantly from an increase in the £20,000 allowance for an ISA. Nonetheless, whether the government would raise the mentioned threshold during high inflation remains to be seen. 

There are reports that the government are considering capping the lifetime allowance offered in an ISA to a maximum of £100,000. If so, it is important for investors to consider investing now, in order to get assets sheltered sooner rather than later. 

UK residents can open ISAs via banks, digital banks or brokerage providers. How do clients choose which type of institution they go with when starting an ISA account?

Clients need to consider their specific requirements and preferences. Clients should assess their unique financial goals and objectives and choose which ISA provider to use by carefully considering their options. However, this requires transparency and easily accessible information from ISA providers to make an informed decision. 

At IBKR, we treat our clients fairly by making all our terms, services, and costs easily accessible on our website. Prospective clients can review this information without needing to provide us with any personal information first so that investors can reasonably compare and evaluate options with transparent evidence over incomplete information. 

We encourage investors to research and learn about the features, services and fees offered by each financial institution before deciding which broker to choose for their ISA. Investors can open an ISA account with the best provider by weighing these considerations. In addition, it can be helpful to consult BrokerChooser and study their ISA provider evaluations before making a final choice. 

How does IBKR design its offers and products to stand out? Could you please share a couple of unique selling points in your offering?

Innovation is our DNA. We work hard to stay at the forefront of the marketplace to provide our clients with innovative products and services. Our mission is to compete on price, speed, size, diversity of global products and advanced trading tools. Our dedication to research and development allows us to offer superior platforms and trading tools and provide better services in terms of efficiency and dependability. We also stand out by continuously designing new trading tools and connectivity to world markets.  

Two things that stand out about our ISA accounts: global diversification, and affordability. We give customers over 40,000 stocks through ISA Accounts, and access to trade on over 90 worldwide exchanges. 

It's essential to consider the entire cost when choosing an ISA Provider. Most brokers make most of their money on custody fees and expensive FX fees built into commissions, which impact investors’ ISA earnings annually. 

Interactive Brokers competes incredibly well compared to the largest UK ISA providers, for example on custody fees. It is very common for other providers to charge annually on custody, however, Interactive Brokers charges nothing for custody.

IBKR is one of the biggest brokerage firms globally and offers a really comprehensive selection of assets, not just on the local UK market. What are the main markets UK residents tend to invest in globally?

Many of our UK ISA clients invest in the US markets. This is Interactive Brokers’ strength. We offer low commissions and access to tight spreads and deep liquidity. 

Is there any difference between opening an ISA account with you or a local broker?

There are many differences in opening a Stocks and Shares ISA account between our competitors and us. ISA accounts through Interactive Brokers UK offer several benefits, for example, the ability to earn GBP 3.449% on any uninvested GBP cash balance above £8,000, low brokerage fees, and fast account opening. We open 80% of ISA accounts on the same day, and there is no minimum deposit to open an account. 

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Clients can transfer their ISA account to IBKR free of charge. How typical is it that clients pick a new provider and transfer their accounts?

It is common that clients can transfer their ISAs for free. At IBKR it is free, and we’ve seen a growing trend of clients recognising our competitive pricing and offering and moving to our platform to take advantage of reduced trade commissions and zero custody fees.  We encourage every person with an ISA account to head to BrokerChooser and compare Interactive Brokers to our competitors side by side in an objective, transparent way. 

Custody fees are also important when it comes to choosing an ISA account. What is the benchmark fee on the market, and what do you usually charge?

We charge no custody fees. Most providers for ISAs charge a custody fee. Competitors' benchmark custody fees vary. The more an investor has in their ISA, the more fees can negatively impact returns. In all times, not just these economically challenging times, passive fees matter to an investor. 
 

Interactive Brokers (UK) Limited is authorised and regulated by the Financial Conduct Authority.  Your investments may increase or decrease in value, and losses may exceed the value of your original capital invested. ISA tax treatment depends on the individual circumstances of each client and may be subject to change in future.