Every time we take a look at the US broker market we see big brands, often publicly traded and tied in one way or another with major US funds or banks. Is the US market an exclusive playground for the big boys? And if it is, does it affect how they treat their clients? Anyway, here is what happens when we match two major US brands – TD Ameritrade and Interactive Brokers.
US brokers comparison shows who is better. Read this review about TD Ameritrade and IBKR.
A great new derivative showed up called CFDs. These Contract For Difference allowed trading without having the underlying assets, and even trade more by leverage. The 2000s set the CFD broker retail industry to become the fintech industry we call it today. Digital money, crypto, neo banking – it is becoming hard to define who is a broker with so many diversified services. As IT, fintech, crypto, and AIs evolve, are we going to call all of them brokers? Retail brokers are entities that allow us to trade our capital into other forms so we can protect and develop our personal finances.
Brokers that we have today are part of the traditional financial system, even though regulators try to shape the rules to accommodate the demand for assets of the new age (crypto). ECN brokers utilize platforms and communications tech to allow traders direct access to the capital market. Their service is priced in commissions for each trade traders make, but in return, they offer them high liquidity and good trading conditions, especially for robots.
The second type of broker is Market Makers. They create their “mini market” out of their client or other liquidity pools. Sometimes, they also offer ECN or DMA accounts, mixing the best of the two worlds.
TD Ameritrade Vs Interactive Brokers
The brokers linked to major funds and banks since the 1970s are unlikely to drop behind the scene unless the brand owners go down in a black swan event. None of the brokers set the minimum deposit amount and none want to limit your trading sizes. Both have proprietary platforms. Big and regulated.
TD Ameritrade is in business for decades as well as Interactive Brokers, having multiple regulation licenses, so how they approach their clients should be different. As these brokers are interesting to US traders, depending on your needs it should be easy for you to pick one or none at all after this review.
TD Ameritrade has many account types, but when it comes to platforms traders can only have several versions of TD Ameritrade’s proprietary platform. It is called thinkorswim.
Thinkorswim desktop is a feature-abundant platform, it has a different layout than what you have seen. That being said, you might turn away from this broker right away or be amazed by so many buttons and complexity. The platform has good customization but it could be overwhelming with many options. It is for professionals, it requires longer than usual learning to trade with this platform. The learning curve is for the patient student who likes to research a lot since there are no interactive tours built-in. It will take a while until you are accustomed to many features, options, selections, etc.
As with other proprietary platforms, thinkorswim is perfectly aligned with TD Ameritrade possibilities. It has Bloomberg like TV, Education, Support, etc. This platform is available as a web, mobile, and desktop version. The web version is much lighter than the desktop and traders with experience will get around it much easier than with the desktop version.
TD Ameritrade built a powerful platform that works very well. If we compare thinkorswim with Trader Workstation by IBKR, we believe thinkorswim is better made.
The most important TD Ameritrade drawback when compared to IBKR is the support for other connectivity, such as TradingView and API.
Interactive Brokers has really pushed the limits with their proprietary TWS or Trader Workstation. This complex platform is on par with thinkorswim of TD Ameritrade when it comes to the number of features, tools, control, and other important elements a professional platform should have. TWS is advanced to the point MetaTrader platforms look like outdated relics of the past.
When it comes to the layout, TWS desktop version is more user-friendly than thinkorswim, but we also think it is less polished. If you pick one of these brokers because of the platform, you will realize they are both powerful platforms and that one will unlikely give you an edge over the other. There are no important traits to recommend one over the other.
Now, the real reason you might pick IBKR over TD Ameritrade are the availability of other platforms. IBKR offers There are a total of 6 platforms offered, all are proprietary and specialized in certain areas. Some are just smaller versions for mobiles and web but there are specialty platforms we think are worth checking out.
IBKR made a marketing trick in a positive meaning with EventTrader and IMPACT. EventTrader is a web specialty platform designed for IBKR’s trading product that mimics binary options. Binary Options were popular because of their simplicity and common people could have fun with them. Beginners would certainly like “Event Trading” considering the simplicity and auto-solving money management.
IBKR IMPACT is another specialized service that aims to align your ideas and investing bias with companies of the ESG trend. Build portfolios can be aligned with pure water, gender equality, reforesting, and other thematics you consider important for the world. The IMPACT app is of high quality with a very immersive design.
TD Ameritrade is linked to Charles Schwab Corp and other banks. It is expected to offer more trading instruments than the average broker. So, there are thousands of instruments that when combined can provide exposure to Stocks, ETFs, Bonds, Options, Mutual Funds, Futures (on many commodities, crypto CME futures, ETFs, indices, and many other classes), Forex (over 70 different currency pairs), IPOs, and other investing-specific assets/services unique to this broker.
The unique part of TD Ameritrade are various investing and retirement plans that are usually offered by banks and insurance companies.
Now it should be clear that you are dealing with a bank/fund/broker institution. If you are interested in Annuities, Dividend Reinvestment programs, Collateral Lending programs, and many IRA account types that TD Ameritrade is offering then you would look for a fund, not a broker. In our opinion, TD Ameritrade is a financial warehouse holding so many bundled packages they are falling onto you once you pull one out. These services should be separated, at least into another website section. One is certain, with the thinkorswim platform you will have the ultimate selection of trading instruments, however, do not expect too much in the crypto category, this is a US-regulated broker after all.
Interactive Brokers is a broker that can compete with TD Ameritrade with thousands of trading instruments. However, we feel IBKR is more of a broker than TD Ameritrade. It is hard to find which asset one has while the other missed it. There are differences, especially in the crypto, but overall these are the same trading asset lists.
IBKR has its Event Contracts and IMPACT products but TD Ameritrade has IPOs, and other, bank and fund-like products/services.
Interactive Brokers have Stocks, ETFs, Options trading, Futures, Forex, Cryptocurrencies, Metals, Bonds, Mutual Funds, Hedge Funds, and specialty Event Contracts.
Again, we have the impression TD Ameritrade’s merger with Charles Schwab Corp is still an ongoing process and it shows in the assets list too. Also, you should be aware that IBKR has a much better global client acceptance.
TD Ameritrade promotes zero-commission trading on US stocks. This is true however, other stocks will have a $6.95 commission. ETFs are also free, No-load funds are free, the Options fee is $0.65 and Futures have a $2.25 fee per contract plus exchange fees. Now, we could list more but there are so many bank-type fees you would just stop reading and are unlikely applicable to traders.
When it comes to spreads, we had to check them from within the platform, the spread information is not present on the webpage. EURUSD spread is about 1.3 pips, for example, which is an average, not very competitive spread.
IBKR has more competitive trading costs. EURUSD spread is about 0.6 pips, although a commission is added on top. There are no account fees, inactivity fees, or minimum deposits with both brokers. Stock commissions for the IBKR Lite are $0 as well. IBKR Pro has commissions although they are competitive, starting from $1 minimum up to 1% maximum. Crypto fees are up to 0.18% per $100000 trade value.
Active traders can get even better conditions, so, when compared, it is clear IBKR is a better choice in this category. We also like the IBKR fee presentation better.
Education and Tools
Well, TD Ameritrade and IBKR are just full of educational and news material. The amount of content and their generation is on par with a major media station. TD Ameritrade has a specially dedicated section for education. What’s more, every online page they have demonstrates they do not assume the reader is a financial advisor but a modest trader/investor. Every service they provide is explained in detail and referenced to more useful content. We like the friendly tone, however, there are too many slogans or boastful promotions.
The educational section is also well organized, you can search, sort, filter, categorize and browse high-quality material.
TD Ameritrade has a specialized content production called Ticker Tape. This is a collective effort for Market news, insights, investing know-how, planning, strategies, and more, designed on a separate webpage.
IBKR has an amazing educational, guidance and insights factory. When compared to TD Ameritrade, we think IBKR has deeper content and more specialized ones. For example, IBKR has IBKR Quant for programming, deep learning, IBKR API, AI, Blockchain, etc, or Student Trading Lab content adapted for tutors.
Now, we like both brokers, rarely a broker can attain such advanced levels without serious attention to education. Interactive Brokers have more interesting content in our opinion but it could also be a subjective preference.
Regulation and Reputation
TD Ameritrade is obviously a specialized broker for US clients. When you want to open an account a pop-up will likely show that your country is not supported. There are many such countries on the list. It would be easier to just present accepted countries.
This broker does not have a pristine history without fines, however, they are not frequent. In 2018, TD Ameritrade was fined by SEC $500,000 for “failing to file certain required suspicious activity reports after the firm halted business with 111 independent investment advisers.”. Also in 2019, a $250,000 fine for inadequate client qualification. But, these fines don’t quite give an impression TD Ameritrade is unethical.
TD Ameritrade promotes many awards from certain review portals, however, such praises are likely affiliated. Unfortunately, TD Ameritrade is not competing very well with IBKR, it is a less popular broker and it shows by the number of client reviews. The rating on an independent client review website is 2.1/5.
IBKR stands better about its reputation. It is one of the most selected brokers for institutional trading. We like that IBKR does not use so many cheezy slogans as TD Ameritrade and also is more substantial about its services. IBKR is more popular but the rating of just 2.4/5 on independent client reviews is a surprise to many.
Conclusion and Summary
At this point, TD Ameritrade is a joint bank/fund/broker institution. As such, we feel some of the core values traders want, such as more platforms, clear and simplified spreads and conditions, better client acceptance, ease of use, immersion.. are just missing. We do not see why would someone choose TD Ameritrade over IBKR. Simply IBKR is better or on par in every category. Of course, it is always recommended to choose a better-rated broker and read client experiences.
Fintech-Insight is dedicated to delivering unbiased and dependable insights into cryptocurrency, finance, trading, and stocks. However, we must clarify that we don't offer financial advice, and we strongly recommend users to perform their own research and due diligence.