Interactive Brokers vs. TD Ameritrade: Which Is Better?

Interactive Brokers and TD Ameritrade are two top players that favours intuitiveness and offer full support to their clients for low to no-costs. 

But which is better? In this article, we will analyse the two brokers to assess which one can better fit your needs. 

Overview of Interactive Brokers Broker & TD Ameritrade Broker

Interactive Brokers vs. TD Ameritrade

Interactive Brokers and TD Ameritrade are two well-known online brokerage platforms that offer a range of investment products and services to retail investors, traders, and institutions. While both platforms have similarities, they also have distinct differences that can impact the investment experience. In this module, we’ll provide an overview of both platforms, compare their pros and cons, and help investors determine which one may be the better fit for their investment goals and preferences.

Interactive Brokers

Interactive Brokers is a leading online brokerage platform offering a wide range of investment products and services to individual investors, traders, and institutions. In this module, we’ll discuss the pros and cons of Interactive Brokers in the context of a retail investor looking to open an account, and provide a comparison with another popular online broker, TD Ameritrade.

Regulation Information: Interactive Brokers is regulated by the Securities and Exchange Commission (SEC) in the United States, the Financial Conduct Authority (FCA) in the United Kingdom, and other major financial regulators around the world.

Interactive Brokers is a complex platform and account minimum may not be suitable for all retail investors. When compared to TD Ameritrade, Interactive Brokers offers lower trading fees and more advanced trading tools, but it may not be as UX/UI-friendly as TD Ameritrade.

TD Ameritrade

TD Ameritrade is a well-established online brokerage platform offering a variety of investment products and services to individual investors, traders, and institutions. In this module, we’ll discuss the pros and cons of TD Ameritrade for retail investors considering opening an account, and provide a comparison with Interactive Brokers.

Regulation Information: TD Ameritrade is regulated by the Securities and Exchange Commission (SEC) in the United States and the Financial Industry Regulatory Authority (FINRA).

TD Ameritrade is a user-friendly platform that caters well to beginners and those who prioritize ease of use and comprehensive research tools. However, it may not be as cost-effective or suitable for active traders as Interactive Brokers. When compared to Interactive Brokers, TD Ameritrade offers no account minimums and a more beginner-friendly platform, but at the cost of higher trading fees and fewer advanced trading features. Ultimately, the choice between Interactive Brokers and TD Ameritrade will depend on the individual’s investment goals, trading style, and level of experience.

Fees and Commissions

While TD Ameritrade has a consistent fees and commissions plan, Interactive Brokers’s fees and commissions differ also according to the account you choose. In both cases, fees and commissions are extremely competitive. 

TD Ameritrade offers 0% commissions on most products: stocks, ETFs, Online options – for which the broker charges $0.65 per contract, and forex trading. If you don’t want to trade autonomously, you can ask for the help of professionals provided by the broker, for commissions that range from $5 to $25. 

The fees applied to futures amount to $2.25 per contract, while $6.95 is the fee for stocks not listed in the US. 

For what concerns Interactive Brokers, the broker offers different fees for stocks according to the type of account: if you choose the Lite account, you’ll be charged $0 if you are a US resident, otherwise, the fee ranges from $0.0005 to $0.0035. The same applies to ETFs. 

Moreover, Interactive Brokers charges up to $0.85 for futures, $0.65 for options.

When it comes to mutual funds, both brokers don’t charge anything for no transaction fee funds, but when it comes to trade, Interactive Brokers charges up to $14.95 per transaction, while TD Ameritrade can charge up to $74.95. 

Both brokers are extremely transparent in communicating all possible commissions and fees to users, and when it comes to the most popular products offered, Interactive Brokers is slightly less expensive. 

Trading Platforms

TD Ameritrade is one of the most popular brokers also thanks to the comprehensive offer of trading platforms, which never give up on intuitiveness. Interactive Brokers chose a different approach, creating different desktop and mobile platforms according to the level of experience of the user. 

TD Ameritrade offers four platforms: 

• The web platform, available online;
• Thinkorswim desktop and web, two platforms that can meet the needs of traders and investors who need more complex features. The web platform is available online, while the desktop platform can be downloaded and easily used on your PC;
• The mobile trading platform of TD Ameritrade is flexible and intuitive, and available on many devices – including wearables. 

Interactive Brokers’s offer is even more varied. The broker is able to offer seven different trading platforms, according to different levels of difficulty and sophistication:

• Client Portal – a web trading platform;
• IBKR Mobile – which offers even more trading tools to users who want to benefit from mobile trading;
• Trader Workstation – or TWS: Interactive Brokers indicates this as their flagship trading platform, the right choice for those who want to use a desktop version and need more complex tools;
• IBKR APIs: Interactive Brokers offers Excel APIs, along with their industrial APIs. These trading tools are designed for experts who prefer to place their trades through an Application Programming Interface.

Then, Interactive Brokers offers two specialty trading platforms:

• IBKR EventTrader: this web trading platform allows for the trading of Event Contracts, which give you the opportunity to trade events that can have only two outcomes – yes or no;
• Impact: a downloadable mobile trading platform, good for beginners as well as for intermediate traders, which allows to trade stocks, options and cryptocurrencies. 

The analysis of the features of the trading platforms designed by the two brokers highlights that even if the offer if TD Ameritrade is always extremely intuitive, Interactive Brokers allows you to choose among more options, and this can help traders and investors with different levels of experience, actually allowing Interactive Brokers to meet the needs of any user. 

Investment Options

For what concerns the investment products and services offered by the two brokers, both Interactive Brokers and TD Ameritrade are able to provide you with a wide range of choices, but Interactive Brokers offers a higher number of investment options and has a more international vocation. 

Let’s see what TD Ameritrade has to offer, first. 

Consider that this broker is mainly designed for the US and Canada markets. If you want to access other markets you’ll need to use the assisted trading options – and this will cost you more money. 

This can be considered as a downside of this broker, but it’s still a valuable platform if you consider the many products it offers: 

• Stocks,
• ETFs,
• Mutual Funds, 
• Options,
• Fixed Income – that is, investment products designed to be as riskless as possible, whose purpose is to protect your capital,
• Futures contracts, 
• Forex – this option in particular is highly appreciated by forex traders and investors, because the broker offers 70 pairs.

If you want to get exposure to the crypto market, you’ll find only crypto derivatives on TD Ameritrade. 

When it comes to Interactive Brokers, these are your investment options: 

• Stocks;
• ETFs;
• Options;
• Futures;
• FOPs – Free Of Payment, which is a type of position transfer for the US market,
• Forex – if TD Ameritrade is particularly appreciated for the number of pairs it offers, Interactive Brokers performs even better, offering over 100 pairs;
• Cryptocurrencies. Differently from TD Ameritrade, Interactive Brokers doesn’t only allow to trade crypto derivatives, but also cryptocurrencies thanks to its partnership with Paxos. The available cryptocurrencies are Bitcoin, Bitcoin Cash, Ether and Litecoin. It’s worth noting that the fees charged are extremely competitive, and even lower than the fees charged by some top crypto exchanges, amounting to 0.18% of the transaction;
• US Spot Gold (USGOLD);
• Bonds;
• Mutual Funds;
• Hedge Funds.

When it comes to investment options, Interactive Brokers offers you a wider choice, and you can trade on different markets even autonomously. 

Customer Service

Customer service is available 24/7, for both brokers. 

TD Ameritrade offers support to users via phone call, social media chats, fax and email. If you prefer to have a conversation in person, you can visit one of TD Ameritrade’s branches. 

Interactive Brokers provide a full on-line experience. You can contact the broker:

• By phone, available 24/7;
• Via email;
• Via the live chat room, available 24 hours a day from Monday to Friday, and from 13:00 to 19:00 on Sunday. 

Both brokers also offer an exhaustive FAQ section you can use to quickly find an answer to your questions. 

Comparing the two customer services, even if the quality is extremely high in both cases, TD Ameritrade seems to perform better for a few reasons:

• First off, it allows you to meet their customer service representatives;
• Its customer service pays attention also to people that usually have more difficulty to get appropriate assistance via most common means of communication, and the broker designed a specific service for the hearing impaired. 

Security

Security is a major concern of traders and investors – and generally of all those who use online services. 

Especially when it comes to activities that involve money, security must take into account both the funds of the users and their sensitive information. 

Both TD Ameritrade and Interactive Brokers know that very well, and they put in place all the security measures needed. 

In the history of TD Ameritrade there is an event that shocked users: in 2007, one of the databases of the broker was hacked, and the information of millions of users were stolen. 

Today, the broker given plenty of suggestions to help its users to protect their accounts, the broker constantly work to keep the whole system safe, and funds are protected using the following measures:

• The broker offers additional free products you can download to protect your devices – moreover, TD Ameritrade always suggest to update your antivirus software;
• It partners with third parties to allow you to buy other security-related products at discounted prices;
• TD Ameritrade clearly explains what are the procedures followed by the broker – so you’re sure that if anyone asks you your passwords via email, it’s not the official broker;
• Your funds are protected by the Asset Protection Guarantee – if you lose your funds because of unauthorised activities, you’ll get fully refunded.

The measures taken by Interactive Brokers are even more complex: 

• First off, the broker is extremely strong under a financial perspective – to mention just a few of the reasons behind this statement, the capital of the broker far exceeds the requirements of regulators, and it’s owned by the public company Interactive Brokers Group, its affiliates and employees – so everyone is directly involved, and the success of the company is pivotal for all its members more than it happens in other companies. 
• The capital of clients is segregated along with a large buffer to guarantee the security of funds.
• Securities accounts fall under the protection of the SIPC (Securities Investor Protection Corporation), which covers up to $30 million according to the market involved.
• The secure login system used by the broker involves a free physical device or, alternatively, the IBKR Mobile Authentication, designed for mobile devices. 

Both brokers also use strong and compliant privacy policies. 

So, in both cases, your funds and accounts are extremely safe, but the measures taken by Interactive Brokers make us lean towards this broker if we have to determine which is better for what concerns security.

Conclusion

Interactive Brokers and TD Ameritrade are both reputable online brokerage platforms that offer a range of investment products and services to retail investors. Both platforms have their strengths and weaknesses, with Interactive Brokers offering lower trading fees, more advanced trading tools, and a broader range of investment options, while TD Ameritrade offers a user-friendly platform, comprehensive research tools, and no account minimums. Ultimately, the choice between these two platforms will depend on an individual’s investment goals, trading style, and level of experience. Investors should consider factors such as trading fees, investment options, platform features, and research tools to determine which platform is the best fit for their needs.

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