What You Need to Know
Interactive Brokers launched crypto trading for clients that are U.S. residents with individual and joint accounts on Sept. 13.
Flourish has also recently launched a crypto offering for RIAs.
Interactive Brokers is hoping that crypto will help expand its current base of 5,731 RIA clients.
Interactive Brokers Group started offering cryptocurrency trading for RIAs in the U.S., enabling them to trade and custody Bitcoin, Ethereum, Litecoin and Bitcoin Cash through Paxos on behalf of clients.
Thomas Peterffy, Interactive Brokers CEO and chairman, said in June he expected his company to start trading cryptocurrencies to customers on its platform by the end of the summer.
“We do not release any new product to the public until it is thoroughly tested,” said Steve Sanders, Interactive Brokers executive vice president of marketing and product development.
“While third quarter was our best estimate, we already launched cryptocurrency trading for clients that are U.S. residents with individual and joint accounts on Sept. 13,” he pointed out to ThinkAdvisor on Monday. “Our announcement today specific to RIAs follows” that, he added.
The company now has 5,731 RIA clients but expects to be able to expand that by offering crypto, Sanders said. He didn’t name any of his company’s RIAs, saying it never names clients publicly.
Beating Interactive Brokers to the market was Flourish Crypto, a recently launched turnkey investment solution providing RIAs access to cryptocurrency investing.
Flourish Crypto is part of Flourish, a larger financial products platform for RIAs owned by MassMutual, which last December invested $100 million in Bitcoin, a transaction facilitated by NYDIG, in which it has a minority stake.
Ben Cruikshank, head of Flourish Crypto, recently said advisors should “take the tone and posture of more traditional financial assets,” including a “real risk management approach,” reviewing compliance requirements and the disclosures and reporting of retail trading platforms on which their clients may be buying cryptocurrencies.
Interactive Brokers Crypto Advantages
“RIAs 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, and all shown on one platform with customizable reports,” according to Interactive Brokers, previously one of the first brokerages to offer no-fee trading and the trading of fractional shares.
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“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,” Sanders said in the announcement.
“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,” he added.
Rival crypto exchanges and brokers charge fees that can be 2% of trade value or more and typically add spreads or markups to the price, Interactive Brokers said.
But crypto trading with Paxos on Interactive Brokers’ RIA platform has commissions of 0.12% to 0.18% of trade value, depending on monthly volume, with a $1.75 minimum per order, Interactive Brokers said. Interactive Brokers also doesn’t add spreads, markups or custodial fees, it said.
Although it is initially making crypto trading available only to RIAs in the U.S., Interactive Brokers said it “plans to launch the service for financial advisors in other parts of the world, in the future.”
A PortfolioAnalyst feature gives advisors the ability to consolidate and analyze a client’s entire portfolio, including assets held at other institutions, Interactive Brokers said.
Paxos offers a regulated blockchain infrastructure platform and says it was the first chartered trust company for digital assets in 2015. It is regulated by the New York Department of Financial Services, oversight that Interactive Brokers said helps protect consumers and provides for assets to be held in bankruptcy remote, segregated accounts.