Advisor Fees

Overview


Advisors1 may charge their clients for services rendered either through automatic billing, electronic invoice or direct billing. You determine the advisor fees at the time of the client's registration, and may modify these at any time in Account Management. In the case of fee increases, the client will be required to acknowledge the fee increase with a signature. In addition to the advisor client fees specified, IB will charge its normal commissions to the client.

Specify all client fees on the Manage Clients > Fees > Configure page in Account Management.


Client Fee Templates

Client fee schedules can be applied to accounts individually or can be stored in templates. As an advisor, you can configure fees for one or more client accounts, or set up client fee schedules in templates, then assign the templates to client accounts. The use of templates allows you to easily maintain different fee schedules for multiple client accounts.

If you are a new advisor (i.e., you just opened your IB account), then there will be a blank default client fee template, which you can then configure with your own fee schedule. If you are an existing advisor, your old global fee schedule is now the default client fee template. You can modify the default template but you cannot delete it.


Charge Commissions and Client Fees to the Advisor

As an Advisor, you can elect to charge client commissions to your own Advisor master account when configuring fees for a client account. Commission charges will revert to the client account if the Advisor master account has a balance of less than 1000 USD or equivalent when the commission charges are posted.

By default, minimum monthly fees, IRA account fees and market data and research fees are charged to Advisor client accounts. However, Advisors can elect to charge these fees to their own Master account for each client account. Client fees will be charged to the client account if the Advisor master account has a balance of less than 1000 USD or equivalent when fees are posted.


Charge Fees on Client Investments in Hedge Funds

As an Advisor, you can also charge fees on the current value of the amount that your clients have invested in hedge funds who participate in our Hedge Fund Capital Introduction Program (HFCIP), which is part of our Investors' Marketplace. If you have already invested funds for your client at the Hedge Fund Investor Site (available at the Marketplace), the invested hedge fund will automatically be enabled for the fee program.

For each client who invests in a participating hedge fund, you can charge fees based on the Annualized Percentage of Net Liquidation Value of the current value of the client's investment in the Fund and/or the percentage of profit and loss of the client's investment in the Fund, as well as configure the fee posting frequency (monthly or quarterly). Your clients must approve the fee schedule by signing a form.

Fees entered for the first time in the middle of a period will be calculated and applied as of the date the fee agreement is approved and entered into the system. Fees changed during a period will take effect as of the beginning of the next monthly or quarterly period. If you change the frequency from monthly to quarterly, the change will take effect as of the next calendar quarter. If you change the frequency from quarterly to monthly, the change will take effect after the end of the current calendar quarter.


Client Fee Reimbursements

Advisors can reimburse fees to client accounts up to a maximum of 50% of invoices (net of any prior rebate) for the trailing 12-month period. Advisors can also modify or cancel pending fee reimbursements and view the details of fee reimbursements that have already been processed. To reimburse client fees, the Advisor client fees must be configured for electronic invoicing.


Trade Allocation Minimum Commissions

We charge a minimum fee for US stock trades allocated by Advisors to their clients. Advisors can choose to charge the allocation minimum fee to their master account or to the client account. By default, the allocation minimum is charged to the client account unless there is a specific rate arrangement between the client and the Advisor.

The minimum amount charged per trade allocation is as follows:

  • Fixed Rate Pricing Minimum: Minimum (trade value * 0.0005, USD 1)
  • Tiered Pricing Minimum: Minimum (trade value * 0.0005, USD 0.35)

Automatic Billing

An IB-calculated advisor fee is automatically billed to the client's account with blanket client authorization using any of the following in any combination:


Percent of Net Liquidation Value

Entered as an annualized percentage, applied on a daily, monthly or quarterly basis.


Flat Fee

Entered as an annualized amount, applied on a daily, monthly or quarterly basis (apportioned by 252 days).


Percent of P&L2

A fixed percent is applied to the mark-to-market P&L (positive or negative) at the end of each period. Any changes made to the specified percent during a period will only be applied on a forward looking basis and will not be applied retroactively. If you do make changes during a period, we break the period into two pieces and apply fees accordingly. If at the end of the billing period the accumulated fee calculation is negative, no fee will be charged. Two periods may be specified for this calculation:

  1. Quarterly as of 3/31, 6/30, 9/30, and 12/31. Fees will be posted 10 days after the close of a quarter.
  2. Annually as of 12/31. Fees will be posted 10 days after the close of the year.

The maximum percent of P&L that you can you charge for either period is 35%.


High Water Marking

Advisors who select Percent of P&L as the basis of their client fees can apply High Water Marking to the billing period client fees to offset periods of losses in a volatile market. You set up High Water Marking on the Client Fees page in the Account Management. High Water Marking lets an Advisor:

  • Specify a look-back period (in quarters or years, based on the period selection in the Percent of P&L fee schedule). High Water Marking keeps track of cumulative losses per billing period within the specified look-back period. A loss in any period will be added to the look-back period's cumulative losses. A gain in any period will decrease the cumulative loss recorded to date. Advisors cannot charge a profit-based fee as long as a cumulative loss exists. By default, the look-back period is zero. High Water Marking is effective on the day we process the approved client agreement.
  • Specify the date on which High Water Marking takes effect.
  • Choose to prorate for withdrawals or deposits. If a client makes withdrawals or deposits during a billing period, an Advisor can choose to prorate the loss (P&L) for that period.
  • Optionally initialize High Water Marking with previous periods' losses by entering the amount of the losses. These losses may have been incurred for the client in another account or with another broker.

Fee per trade unit (shares, contracts, %) - Specified by currency/asset class (i.e. stocks, options, futures, etc.)

A fee per trade unit may be entered as an absolute markup over and above commissions charged by IB, as a percentage of commissions charged by IB, or as an absolute amount (commissions charged by IB will be subtracted from this amount). Fee per trade unit is not available for US or US protectorate legal residents due to regulatory restrictions, with the exception of US commodity-registered advisors, who are allowed a per-trade schedule for futures. For more specifics on fee per trade unit, see our Broker Client Markup page.

For specific examples of automatic billing, click here.

Electronic Invoices

Advisors can submit electronic invoices from the Manage Clients > Fees > Invoicing page in Account Management. Before you can submit fee invoices for client accounts, you must first configure Automatic Billing for Monthly/Quarterly Invoicing for the account(s) on the Manage Clients > Fees > Configure page in Account Management. You must specify a monthly or quarterly markup limit, which can be a dollar amount, or a percentage of the client's Net Asset Value, or both, then calculate the markup and submit an electronic invoice for each client account at any time, up to the specified limit. The invoice amount will be automatically transferred from the client account to the advisor account.

Invoices submitted prior to 5:30 (17:30) PM EST will be processed by IB the same day (U.S. night) and appear on that day's statements. Invoices submitted after 5:30 (17:30) PM EST will be processed by IB on the next business day. You can submit invoices for up to ten clients at a time, but only one invoice per client account per day.

You can also upload a .csv (comma-separated values) file containing multiple client invoices. The .csv file must contain fields for:

  • Client Account Number
  • Amount (in client account's base currency)
  • Money Manager Account Number (only if the invoice is to be paid to a Money Manager)
  • Memo (this field is optional)

Setting Maximum Invoicing Amounts or Percentage Caps

When you configure client fees or create a client fee template, you can include a maximum invoicing amount or percentage cap on a monthly or quarterly basis. The percentage cap is the maximum percentage of the amount of a client account's Net Asset Value (NAV) to be invoiced. You can set an amount or a percentage cap or both. If you set both the amount and the percentage cap, we will use the lower of the two amounts as the amount to be charged.

For percentage cap, we look back on the prior period to calculate the fee limit, while amount looks at the current period.

(Fee Cap % x Ending Client NAV) / 252
where 252 is the average number of business days in a year.

For example:

  • If a client account is configured for a maximum invoicing amount of 500 USD on a monthly basis and you log into Account Management to submit an invoice for the client in July, the total amount processed in July cannot exceed 500 USD. You can submit multiple invoices but the total cannot exceed 500 USD for the month.
  • If a client account is configured for maximum invoicing amount of 1000 USD on a quarterly basis and you log into Account Management to submit an invoice for the client in July, the total amount processed between July and September cannot exceed 1000 USD. You can submit multiple invoices but the total cannot exceed 1000 USD for the quarter.
  • If a client account is configured for percentage cap on a monthly basis and you log into Account Management to submit an invoice for the client in April, the available fee amount is based on the client's daily NAV for March. You can submit multiple invoices but the total cannot exceed the limit for the period.
  • If a client account is configured for percentage cap on a quarterly basis and you log into Account Management to submit an invoice for the client in November, the available fee amount is based on the client's daily NAV from July to September. You can submit multiple invoices but the total cannot exceed the limit for the period.

Invoice Notifications

To help you meet your compliance obligations, we can notify all of your clients about advisory fees to be deducted from their accounts before those fees are actually charged. These notices describe the method used to calculate the fee, the amount of the fee and the period covered by the fee.

In Account Management, you can configure how we send these notices to all of your clients: by email, in the Customer Service Message Center, or no notification at all. By default, your clients will NOT receive any notification about fees; the fees will be automatically deducted from their accounts.

Caps and Limitations

Automatic billing and electronic invoices are subject to certain caps and limitations.



Disclosures:
  1. Only Advisors who are exempt from registration are eligible to open an IB "Friends & Family" account. Registration requirements can vary among jurisdictions. For example, advisors who reside in Canada and charge fees for their services must be registered under Canadian law. Advisors residing in the U.S. may be required to register under either State or Federal law if they meet certain criteria (e.g., total assets under management, number of clients, whether they receive compensation, etc.). YOU MUST RESEARCH THE SPECIFIC REGULATIONS IN YOUR STATE/COUNTRY AND DETERMINE WHETHER OR NOT YOU ARE REQUIRED TO REGISTER AS AN INVESTMENT ADVISOR.
  2. For the purpose of calculating performance fees, P&L on FX trades is included solely on the dates at which the position is either open or closed and excludes the effect of any exchange rate fluctuations between those dates. On the open and close dates, P&L is calculated based upon the difference between the trade price and the end of day conversion rate.