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Small RIA custodian launches dream crypto trading and custody-- cheap, broad and on one screen-- but will supply drive profitable demand?

Interactive Brokers lets RIAs -- even Schwab and Fidelity RIAs skimming the service -- do one screen for conventional securities and Bitcoin, Ethereum, Litecoin and Bitcoin Cash.

Tuesday, October 19, 2021 – 5:55 PM by Brooke Southall
Steve Sanders: We certainly don’t know of another broker who provides this service.

Interactive Brokers Group (IBKR) yesterday (Oct.18) announced its launch of cryptocurrency trading for RIAs in the United States -- and it doesn't look like a token effort.

Mike Alfred
Mike Alfred: 'I just don't think IBKR is a big player with RIAs.'

Advisors using the Greenwich, Conn., RIA custodian can trade and custody Bitcoin, Ethereum, Litecoin and Bitcoin Cash with no ticket charges, no custodial fees, no minimums and no technology, software, platform or reporting fees, the firm says in a release.

"I certainly don’t know of another broker who provides this service," says Steve Sanders, executive vice president of marketing and product development at Interactive Brokers. 

"Our key differentiator is that our RIA clients will benefit from the ability to manage their client’s positions in cryptocurrency in addition to stocks, options, futures, bonds, mutual funds and ETFs from all over the world from a single screen."

IKBR's offering is built with big help from Paxos Trust Company, which was also the key partner for Flourish's crypto-offering. Yet Flourish is no custodian. See: MassMutual upgrades Flourish to trade and hold RIA crypto AUM, compete at a Coinbase level, on strength of Orion, Black Diamond, Tamarac tracking -- but big RIA client, Buckingham, says 'no thanks' to the offer, for now

Sending a message

Better yet, the price is right. 

"Other crypto exchanges and brokers charge fees that can be as high as 2% of trade value or more and add spreads or markups to the price," the release states.

"Cryptocurrency trading with Paxos on Interactive Brokers’ RIA platform has low commissions of just .12% -.18% of trade value, depending on monthly volume with a USD $1.75 minimum per order. In addition, there are no added spreads, markups, or custodial fees.

The offer looks good in the abstract, but it has one real-world drawback, according to Mike Alfred, who recently sold is crypto-asset research firm to New York Digital Investment Group (NYDIG). See: Mike and Ryan Alfred -- and their celebrity RIA investors -- sell Digital Assets Data to NYDIG, after market failed to develop for their Bitcoin data mining firm

"I just don't think IBKR is a big player with RIAs the way Schwab and Fidelity are," he says.

"I would sit straight up and pay attention if this release was about Schwab. I think it's smart to make this play, but I'm not convinced it will be a significant driver of new business." 

Sanders responded: "Certain individuals are ignorant when it comes to IBKR," he says.

"IBKR custodies 5,731 RIAs and now, through Paxos, Interactive Brokers is one of the first full-service custodians to offer cryptocurrency trading alongside other asset classes available on the IBKR platform. We certainly don’t know of another broker who provides this service."

Product drives demand

Schwab held -- until recently -- that RIAs show lack luster interest in holding cryptocurrency. But Sanders says his company doesn't chart its product map that way. See: Schwab dismisses crypto currencies as 'speculative' and too insignificant for its RIA platform as rivals stake out turf for the coming boom... or is that bust?

“We continually offer clients access to new products and tools to meet a wide range of investment and trading objectives, and judge the demand after.”

It sends the message that IKBR wants to send to RIAs, according to Sanders  See: When Interactive Brokers sweetened its RIA custody offering in 2019, it worked -- so now it's investing in more sugar

“Allocating a small percentage of assets to cryptocurrency as part of a well-diversified portfolio has steadily become more commonplace, and advisors may wish to recommend cryptocurrency to their clients,” he said in the release.

“Adding cryptocurrency trading underscores our ongoing dedication to providing advisors with the investment products and tools they need to successfully manage client portfolios and grow their businesses.” See: Interactive Brokers, the Mouse that roared, fires shot across the bows of Schwab, Fidelity, TD and Pershing over RIA custody: 'The market will catch up to our vision'


Mentioned in this article:

Interactive Brokers
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Top Executive: Thomas Peterffy




Brian Murphy

Brian Murphy

October 19, 2021 — 8:05 PM
To be applauded - I suspect Schwab & Fidelity will be forced to follow suit within the next six months. Hope it helps IBKR's business on the demand side!

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