Back in April 2015 online trading giant Interactive Brokers acquired a Boston-based startup called Covestor. And after seven years of incubation and development, it’s been reincarnated under the brand of Interactive Advisors.
What is Interactive Advisors?
Interactive Advisors is a Roboadvisor that uses modern technology to help clients meet their investing goals.
The investment platform offers 78 separate funds, including smart beta and ESG funds, spread across 5 risk cohorts, ranked 1 to 5 by risk, giving investors the opportunity to tailor a portfolio that’s personal to them.
The Interactive Advisors product adds to the suite of IBKR added value services like IBKR GlobalAnalyst, IBKR GlobalTrader and the IBKR IMPACT app.
How does Interactive Advisors work?
Clients who sign up for the service are asked to fill in a risk questionnaire that contains nine questions. The answers to which allow Interactive Advisors to gauge the client’s attitude toward risk and generate an individual risk score for the customer.
In an inspired bit of thinking, the clients’ risk profiles, are also scored on a scale of 1 to 5 and clients are only allowed to invest in funds that are in a risk cohort with a score that’s equal to, or lower than their own risk score.
Ensuring that clients are only ever invested in funds that match their personal risk tolerance.
In terms of the fund cohorts, 1 is the least risky, cohort 2 can be thought of as being equivalent to broad market risk, whilst cohort 5 is the highest risk level.
Interactive Advisorss offer clients funds and portfolios from leading institutions such as GlobalX ETFs, FTSE Russell and State Street Global Advisors.
And as you would expect from an Interactive Brokers’ offering charges are kept to a minimum, though they do vary by fund and provider.
Interactive Advisorss technology can help would-be investors, with tools such as Goal Tracker, which allows clients to set targets and end goals, and measure those against their expected investments, and likely fund performance, over say, a ten-year time frame.
The predicted returns are simulated projections of course, but Goal Tracker will certainly give you a good idea of what’s likely to be attainable, and what isn’t.
There is also a range of in-depth reporting tools which allow customers to dig down into a fund’s construction and look at the relative performance between funds and styles.
Interactive Advisors ESG and smart beta portfolios
There are smart beta portfolios too, funds that aim to capture the specific traits of a group of stocks, that meet certain style criteria, for example, dividends or quality of earnings etc.
You can also use Interactive Advisors’s technology to create portfolios linked with specific ESG investing goals, such as ethical leadership or ocean life.
Interestingly Interactive Advisors has combined smart beta factors with ESG goals. Such that clients can invest in portfolios designed to target ESG, using say growth or value, as an investment style.
In fact, by combining smart beta and sector-focused portfolios, and using the Interactive Advisors tools and technology, clients can build a pretty sophisticated investment strategy, should they wish to do so.
For the moment at least Interactive Advisors is only available to US customers. However, having spoken to senior members of the team behind the service, it’s clear that they would like to launch in the UK and European markets as and when conditions and demand allow them to do so.
With over 35 years of finance experience, Darren is a highly respected and knowledgeable industry expert. With an extensive career covering trading, sales, analytics and research, he has a vast knowledge covering every aspect of the financial markets.
During his career, Darren has acted for and advised major hedge funds and investment banks such as GLG, Thames River, Ruby Capital and CQS, Dresdner Kleinwort and HSBC.
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As well as extensive experience of writing financial commentary, he previously worked as a Market Research & Client Relationships Manager at Admiral Markets UK Ltd, before providing expert insights as a market analyst at Pepperstone.
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