Advisor Client Markups

Overview

Professional and Friends & Family Advisors(1) may charge their clients for services rendered either through automatic billing, electronic invoice or direct billing. You determine the advisor markup at the time of the clients registration, and may modify these markups at any time within Account Management from the Funds Management/Client Fees section. 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.

Notes:
  • [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.

http://www.interactivebrokers.com/en/p.php?f=advisorWrapFees&p=overview

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 basis.

Flat Fee
Entered as an annualized amount, applied on a daily basis (apportioned by 252 days).

Percent of P&L1
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.

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 Funds Management section of 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 IB's standard commissions, as a percentage of IB's standard commission, or as an absolute amount (IB's standard commissions 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 Commissions Markup page. Please note the following differences from the Broker model:
  1. Interest Rate Markups and Markdowns are not available for advisors.
  2. Futures and Futures Options Fee per Trade Unit may only be entered by currency and not product.
  3. A global fee schedule is not applied to all client accounts by default, but may be copied from memory to make input of new client schedules easier.

Notes:
  • For specific examples of automatic billing, click here.
  • [1] 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.

http://www.interactivebrokers.com/en/p.php?f=advisorWrapFees&p=billing

Electronic Invoices

Advisors can submit electronic invoices from the Advisor Invoicing page in Account Management/Funds 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 Client Fees page in Account Management. You must specify a monthly or quarterly markup limit, 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.


Client Authorization
Existing Client
Authorization
  1. Select your client account through Account Management/Funds Management/Client Markups, and specify the monthly or quarterly limit in the space provided.
  2. Print the completed Client Fees PDF.
  3. Obtain client authorization (client signature) on the PDF and submit it to IB at the address printed on the PDF.
New Client
Authorization
  1. Fully electronic: Advisor specifies the monthly or quarterly limit from Account Management/Account Administration/Add Account/Client Invitation and sends the invitation to their client(s). Client reviews and accepts the invitation electronically.
  2. Semi-electronic: Advisor completes the fees section of the account application PDF, by selecting the appropriate fee methodology (Monthly or Quarterly Invoicing) and specifying the limit in the space provided through Account Management/Funds Management/Client Fees; Print the completed account application PDF and obtain client authorization (client signature) on the PDF and submit it to IB at the address printed on the PDF.
  3. Paper client: Either advisor or the client fills out the account application PDF and submits it to IB at the address printed on the PDF with client authorization (client signature).
Once IB receives and processes the Advisor Fees PDF, the advisor may start submitting electronic invoices through Account Management.

Client Invoicing
  1. In Account Management, select Funds Management > Advisor Invoicing.
  2. Select the client account that you want to bill from the client account list.
  3. Specify the fee.
  4. Click the Continue button to submit the invoice. 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.

http://www.interactivebrokers.com/en/p.php?f=advisorWrapFees&p=invoices

 

Direct Billing

IB will not remove funds from the client's account. It is the advisor's responsibility to bill the client directly.


http://www.interactivebrokers.com/en/p.php?f=advisorWrapFees&p=dbilling

Caps and Limitations

Automatic Billing and Electronic Invoices are subject to the following caps and limitations:

  • If an auto-liquidation occurs, no client fees will be automatically billed.
  • Client fees are based on Tangible Equity. Tangible Equity is calculated as follows:

    Tangible Equity = Equity (including Payables) - Receivables.

    There is no client fee to be collected if Tangible Equity is under $3000.
  • IB caps the amount of advisor fees earned in any 360 day period to 25% of the client's average equity over this period, with additional cap limits at 30 day increments in between (i.e. 7.2% over the last 30 days, 17.7% over the last 180 days). When any fee cap is exceeded for a client, the advisor will not receive any client fees until the fee cap is no longer exceeded. IB will continue to charge its standard commissions when the fee cap limit is exceeded. Please be aware that advisors are solely responsible for ensuring that the fees they charge are reasonable and in accordance with regulatory requirements. The complete cap schedule is as follows:

    Period Fee Cap %
    30 days 7.2%
    60 days 10.2%
    90 days 12.5%
    120 days 14.4%
    150 days 16.1%
    180 days 17.7%
    210 days 19.1%
    240 days 20.4%
    270 days 21.7%
    300 days 22.8%
    330 days 23.9%
    360 days 25.0%

  • Client fee cap availability for the day will be reported under Account Management/Report Management. For complete details on how the fee cap is calculated, click here.
  • A fee per trade may be charged for clients outside of the US (or US protectorates). In addition, a fee per trade may be charged for futures, futures options, Single Stock Futures and Forex trades of US clients if the advisor is registered with the NFA. This fee may not exceed 15 times IB's commissions, and no fee per trade will be applied if the client calls IB to close a trade.

http://www.interactivebrokers.com/en/p.php?f=advisorWrapFees&p=limitations