Interactive Brokers (IB) roboadvisor

Anyone tried it? Not technically a robot, but they offer various portfolios in a separately managed account for pretty low fees. I assume it earns its rent from the tax loss harvesting? Specifically the smart beta stuff. It also has a marketplace of actively managed stuff from hedge funds and RIAs at higher prices.

They bought Covestor and some of the actively managed profiles are from those active managers. I followed a few of the better Covestor managers for a while, but I think most of them became RIAs or started their own hedge funds. I have some money in an IB managed account by an RIA, and while he’s done well, he no longer offers managed accounts and you’d need to be accredited for his hedge fund. IB is supposed to have a nice setup for RIAs and customers and I found it quite good on the customer side - just like your own trading account, but with someone else doing all the work and billing you quarterly whatever your deal was on fees.

The smart beta stuff sounds interesting and I may use it to replace my SDY holdings. The management fee is only eight basis points but remember they also charge commissions to buy and sell. It seems like the fees could be hefty buying in, but would be lower than a similar ETF during the life of the holding.

Brokerage arrangement and applicable commissions
Pursuant to the Investment Management Agreement between IBKRAM and its clients, all brokerage transactions occur through Interactive Brokers LLC, an affiliate of IBKRAM. IBKRAM does not offer services through any other broker-dealer. The use of an affiliate for brokerage services represents a conflict of interest. IBKRAM clients acknowledge this conflict of interest and authorize IBKRAM to execute transactions through Interactive Brokers LLC when they open an IBKRAM account. Clients should consider the commissions and other expenses, execution, clearance, and settlement capabilities of Interactive Brokers LLC as a factor in their decision to invest in an IBKRAM Portfolio. IBKRAM believes it can meet its best execution obligation by trading its clients’ trades through Interactive Brokers LLC. While there can be no assurance that it will in fact achieve best execution, IBKRAM does periodically monitor the execution quality of transactions to ensure that clients receive the best overall trade execution pursuant to regulatory requirements.

Interactive Brokers LLC charges IBKRAM clients commissions based on IB’s tiered commissions structure for stock trades and IB’s standard options commissions structure for options trades.

Generally, for transactions in stock portfolios managed by third-party managers, Interactive Brokers LLC charges IBKRAM clients commissions of $0.0035 per share, with exchange, regulatory and clearing fees charged separately. (This is subject to a minimum per order commission of $0.35 and a maximum of 0.5% of the value of the trade.) For transactions in options portfolios managed by third-party managers, Interactive Brokers LLC charges IBKRAM clients commissions as specified in the standard options pricing structure for North America set forth on IB’s website.

For transactions in Smart Beta Portfolios, which are managed by IBKRAM, Interactive Brokers LLC offers IBKRAM clients a modified tiered commission structure. Under this structure, Interactive Brokers LLC charges $0.0035 in commissions per aggregated shares based on the whole “basket” of securities in a client’s Smart Beta investment rather than on each security. Generally, for Smart Beta Portfolio trades, Interactive Brokers LLC charges a minimum commission equal to the lower of $5 or 0.05% of trade value per client account, if more than the standard tiered commissions charge of $0.0035 per aggregated shares in the client basket. Interactive Brokers LLC caps commissions on Smart Beta portfolios at 0.5% of the value of the basket trade.

Additionally, Interactive Brokers LLC requires certain types of brokerage accounts to generate a minimum level of commissions each month. Under certain circumstances, Interactive Brokers LLC will charge IBKRAM clients a minimum monthly commission charge of up to $10. Specifically, whenever the overall monthly commissions paid by all IBKRAM client accounts do not amount to at least $10 in commissions per account per month, Interactive Brokers LLC will collectively charge IBKRAM clients the difference between the actual commissions charged and the overall $10 minimum due for all IBKRAM clients, determined on a pro rata basis (based on the amount by which each IBKRAM client account is below the $10 minimum.)

And commissions are how financial advisors bilk their clients. A conflict of interest if there ever was one. That’s why you need to pick a firm that has a reputation for honesty. Which is why I use Vanguard’s robo advisors. Low cost index funds, they balance the portfolio to your situation, what’s not to like?

IB’s commissions are super low and they’re charging you at their regular cheap rates for this program. I wouldn’t worry at all about commission expense, and focus on whether I actually wanted the investment product offered. Run the numbers on $0.35/100 shares and see for yourself.

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Per IB sales, the Smart Beta stuff has the commissions embedded into the management fee. Everything else is as Xerty described- standard commissions to make the trades in your account and management/incentive fees charged separately.