What does Interactive Advisors do?
Interactive Advisors is a robo-advisor and managed-portfolio platform offering automated investment management through proprietary portfolios and strategies supplied by third-party portfolio managers.
Clients can choose among portfolios that follow different investment strategies rather than relying on a single standardized portfolio model. This choice also adds complexity because fees, minimums, risk levels, and portfolio management approaches vary by strategy.
Interactive Advisors overview:
Account minimum | $100 |
|---|---|
Management fees | 0.10% to 0.75% annually |
Portfolio choices | Interactive Advisors portfolios and third-party manager portfolios |
Available investments | ETFs and stocks across asset-allocation, index, factor, ESG and third-party managed portfolios |
Customization | Adjust ETF weights, add selected tilts and restrict certain holdings |
Distinctive feature | Clients can combine proprietary low-cost portfolios with strategies supplied by third-party registered portfolio managers |
Tax-loss harvesting | Available only for the asset allocation portfolio |
Customer support | Phone, chat or email support |
Legal entity | Covestor Ltd. |
Main limitation | No comprehensive financial planning |
How it works:
- Open an brokers account with the firm
- Complete the risk questionnaire
- Receive a risk score from 1 to 5
- Review the recommended asset allocation portfolio
- Accept, adjust or select another eligible portfolio
- Fund the account and meet the portfolio minimum
- Receive automated trading and rebalancing
Key service:
- Asset Allocation Portfolio: A diversified portfolio generally holding 10 to 14 ETFs
- Diversifies across stocks, bonds and inflation-hedging assets
- Adjusts the allocation to the client’s risk level
- Uses fractional ETF shares to reduce idle cash
- Charges a 0.20% annual management fee
- Interactive Advisors portfolios: Proprietary strategies covering asset allocation, smart beta, index tracking, socially responsible investing
- Third-party manager portfolios: Strategies based on the trading decisions of outside registered portfolio managers.
- Automated management: Interactive Advisors has discretionary authority to place trades and replicate portfolio rebalancing without obtaining approval for every transaction.
- Optional tax-loss harvesting: Clients invested in a taxable Asset Allocation portfolio can activate automated tax-loss harvesting. The feature is not available for all portfolios.
Interactive Advisors’ investment approach combines risk-based portfolio matching, diversification and automated management. Investors receive a risk score that limits them to suitable portfolios, then choose from diversified ETF strategies or portfolios managed by third-party professionals.
After investment, the platform handles trading and rebalancing, while clients retain some control through portfolio selection, allocation adjustments and investment restrictions.
What are the pros and cons of Interactive Advisors?
Here is a look at the pros and cons of Interactive Advisors.
Pros of Interactive Advisors:
- Extensive portfolio choice: Investors can choose diversified ETF portfolios, factor strategies, ESG options and actively managed third-party strategies.
- Low entry point: Most investors can begin with one of the platform’s $100-minimum offerings.
- Clear risk controls: Portfolio eligibility is restricted according to the client’s questionnaire-based risk score.
- Transparent portfolio information: Individual portfolio pages disclose strategy, risk, fee, minimum and performance data before investment.
Cons of Interactive Advisors:
- No comprehensive planning: The advisory agreement covers discretionary portfolio management, not retirement, tax, estate or broader financial planning.
- Fee variation: Portfolio Manager portfolios can cost more than proprietary IA portfolios, so the exact price depends on the portfolio selected.
- Account complexity: Clients must use an Interactive Brokers LLC account, and some portfolios may be unavailable if risk score, funds, or account capabilities do not match requirements
Interactive Advisors fees: How much does Interactive Advisors cost?
Interactive Advisors charges an asset-based management fee calculated daily and deducted monthly in arrears.
The applicable rate depends on the portfolio rather than the client’s total account balance.
No management fee applies to cash or other account assets not invested in an Interactive Advisors portfolio.
Portfolio type | Annual management fee |
|---|---|
Smart beta, asset allocation, socially responsible investing, and index tracking portfolios | 0.20% |
WisdomTree, SSGA, and ETF portfolios | 0.10% |
Manager portfolios | 0.25%–0.75% |
ETF expense ratios are additional and are paid indirectly through the funds.
Third-party manager portfolios charge up to 0.75% annually. Investors need to decide whether the specialized strategy and outside management justify the higher cost.
What is Interactive Advisors’s minimum account size?
- Interactive Advisors Portfolios: $100 minimum. This category includes Asset Allocation, Smart Beta, socially responsible, index-tracking, WisdomTree ETF and State Street/SSGA ETF portfolios.
- Manager Portfolios: Most require between $500 and $50,000, although the majority have minimum investments of $10,000 or less.
Fractional-share trading allows most portfolios on the platform to start with relatively small investment amounts. However, investors considering a third-party manager portfolio need to check the minimum shown on that portfolio’s individual page because the requirement varies by strategy.
Who should choose Interactive Advisors?
Interactive Advisors works well for:
- Lower-minimum investors: IA portfolios can start at $100, which lowers the entry barrier for managed investing.
- Portfolio shoppers: The service is built for investors who want to compare managed strategies by fee, risk, category, and manager.
- Hands-off investors: Interactive Advisors handles portfolio trading after the client selects eligible portfolios and grants discretionary authority.
- Taxable account users: Asset Allocation portfolio clients can consider the optional tax-loss harvesting feature.
Who might not benefit as much:
- Full-planning clients: The service does not provide personalized estate, tax, legal, accounting, or retirement planning.
- Advisor-relationship seekers: The model is primarily online rather than a dedicated planner relationship.
- Investors seeking extensive customization: Most portfolios follow predefined strategies, while customization is limited mainly to selected allocation changes and security restrictions.
Interactive Advisors: Is it secure?
Interactive Advisors is registered with the SEC, while client assets and brokerage transactions are held and processed by affiliated broker-dealer Interactive Brokers LLC.
Interactive brokers is a member of FINRA and SIPC, with SIPC protection covering up to $500,000 per eligible account, including a $250,000 cash limit; this protection does not cover market losses.
Interactive brokers uses two-factor authentication through its Secure Login System and IB Key to reduce unauthorized access risk.
Interactive Advisors: Customer service
Interactive Advisors is primarily a digital service rather than an ongoing personal-advisor relationship.
Clients can contact support about account servicing and investment-management questions by telephone or email. Telephone support is available from 9 am to 5 pm Eastern Time, Monday through Friday.
Licensed investment professionals are available to provide support, but clients do not receive a dedicated personal advisor or comprehensive financial planning.
Interactive Advisors: Mobile App
Interactive Advisors has a dedicated mobile app that allows clients to manage their investment accounts, monitor portfolios, track performance, and stay on top of their financial goals.
Is Interactive Advisors worth it?
Interactive Advisors is designed for investors who want a digital managed-portfolio platform with relatively low starting minimums and a broad selection of investment strategies. Clients can choose from proprietary and third-party portfolios rather than being assigned to one standardized robo-advisor portfolio.
The main trade-off is complexity.
Fees and minimums vary by portfolio, and investors need to compare different strategies, managers and risk levels. The service also does not replace comprehensive financial planning.
Compared with a basic ETF portfolio, it adds discretionary management and a wider range of managed strategies. Compared with a full-service advisor, it provides limited personalized tax, estate, legal and retirement-planning support.
It appears most suitable for investors who want online portfolio management and are comfortable selecting among multiple managed strategies.
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