IG Review: Good For Traders, But Investors Might Spin Their Wheels!

ig Review

Category Ranking

3.5

GOOD

LAGGER
FAIR
GOOD
EXCELLENT
<2.5
2.5-3.5
3.5-4.5
4.5-5.5

CATEGORY: Tier 1

AVAILABILITY: UK ONLY

BROKER SCORE

3.5

/5

Category Ranking

3.5 GOOD

LAGGER
FAIR
GOOD
EXCELLENT
<2.5
2.5-3.5
3.5-4.5
4.5-5.5

CATEGORY: Tier 1

🌎 UK ONLY

BROKER SCORE

3.5

/5

Our take: With average costs and poor usability for its investment services, IG is not a very competitive option for most UK investors. Long term investing is an afterthought in IG’s strategy and the services available for this purpose are somewhat disappointing as a result.

Our assessment: IG scores 3.5 on an absolute basis, given average fees for general and ISA account, and prohibitively high SIPP costs. From a safety perspective, it does benefits from an Investment Grade Rating. In its category, it also scores 3.5 given the weight of fees and platform sub-score for Tier 1 Brokers. The IG platform is geared towards traders rather than investors. 

Is it suitable for you?

  • Passive Investors: The user interface is tough to navigate, and the costs are not the most competitive compared to simpler and more straightforward brokers. The right investments are available but it’s not clear that IG is the way to access them.
  • Semi-Active Investors: For those who can successfully navigate the platform there are enough investment options to assemble more complex portfolios. The lack of Junior Accounts can be also not suitable for some. SIPP fees are high. 
  • Advanced Investors: IG has limited options for the advanced investors. Without access to US ETFs or margin loans you are left with a relatively expensive platform, especially for those looking to use a SIPP alongside an ISA to invest for the long run.

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Pros & Cons and suitability

Pros & Cons

Suitability

SOMEWHAT Suitable

High costs and complicated interface. no automated investing.

Suitable

Good range of Products. But no family accounts and high sipp costs.

Suitable

No US ETF trading, no margin loans, but good range otherwise.

Availability

IG is only Available in the UK

IG Group’s trading services (derivatives business) are available worldwide through its UK, EU, Australian, South African, Swiss and US entities. However, its investing services that are more relevant for long term investors (e.g. General Investment Account, ISA, SIPP) are only available to UK residents. Since it’s these we are interested in here, it is only relevant to UK based investors.

Broker Snapshot

Why IG is a Tier 1 broker?

IG was established in 1974, initially to allow speculation on the price of gold via contracts for difference (CFDs). It has grown since then to become one of the largest trading platforms in the world, with a market cap of £2.7 billion as of April 2024. IG’s revenues in 2023 were over £1 billion, and it has enjoyed high profitability over the past three years, posting profits of £446m in 2021, £477m in 2022 and £450m in 2023. It operates its trading platforms worldwide and has bought out several other trading platforms including U.S. firm Tastytrade. 

Long standing Broker, Rated and listed

IG has a weak Investment Grade (borderline High Yield) rating from Fitch, and is a profitable financial institution in the business since the mid 70s. It is owned by several institutional investor with Artemis and Blackrock having the highest stakes and it is listed on the LSE stock exchange with a £2.7bn market cap. Like all UK brokers, it offers client protection up to £85,000 under the Financial Services Compensation Scheme and is regulated by the FCA. 

Company Info

CharacteristicIG
Inception Date🛈 1974
Headquarters🛈 London, UK
Key Owner🛈 Artemis (11%) BlackRock (7.7%)
Bank Affiliated❌ No
Listed on Stock Exchange✅ LSE £2.71 bn
Parent Rating✅ Fitch BBB-
Operating Profit✅ £449.9m 📈

Regulation

FeatureIG
EU Entity🛈 None
UK Entity🛈 IG Group
Key Regulators✅ UK
EU Regulator N/A
UK Regulator✅ UK (FCA)
EU GuaranteeN/A
UK Guarantee🛈 Max. £85k

High trading fees, Good eTF availability and low custody fees

IG  offers extensive ETF and international stock exchange access. The custody fees are waived if you do at least 3 transaction per quarter, however transaction fees are high. Accounts do not earn interest on cash and foreign exchange rates are average. 

Features

FeatureIG
Key Base Currencies🛈 GBP
ETF Availability✅ High
Multicurrency❌ Not Available
Cash Interest❌ No
Margin Loans❌ Not Available
Exchanges✅ LSE, NYSE, NASDAQ, Euronext, Deutsche Borse, SixSwiss
Security Transfer✅ Yes
External PFOF Reliance✅ None

Fee Structure

FeatureIG
Custody Fees✅ Low (None with 3 trades a quarter)
Inactivity Fees✅ None
ETFs Dealing Fees⚠️ £8
FX Fees↔️ Average
Deposit Fees✅ None
Withdrawal Fees✅ None
Security Lending🛈 Not Available

I. Company

IG is a well-established, very profitable, listed, and Investment Grade rated broker that has been in business for over 50 years. The major revenues sources come from the trading division business that focuses on different types of derivatives. Due to this focus on speculative products, it has received some criticisms in the past.

Business Profile

IG Group strategy is centered around four product areas operating under the IG, IG Prime, Tastytrade, Tastylive, DailyFX and Spectrum brands:

  • Over the counter (OTC) derivatives, FX and options (83%  of revenues)
  • Exchange Traded Derivatives (15% of revenues)
  • Stock Trading and Investments (2% of revenues)
  • Content and Education

The first two of these areas deliver most of IG Group’s revenue and profits on an annual basis. Stock trading and investments accounted for just £22.6m or 2% of £941.8m total trading revenues for the year ending May 2023. This should be an immediate clue to where the attention and focus of the company is likely to be – namely on derivatives, FX, options and ETDs.

IG’s focus on trading and CFDs means traders can access the trading platform over much of the world including Europe. IG’s European entity IG Europe is accessible across the European Union and takes account applications globally (excluding UK and Switzerland, where citizens must use their own IG entity). 

Their investing platform for those wishing to own the underlying securities rather than speculate on them is only available in the UK and will be our focus.

Ownership and Transparency

IG is majority owned by institutional investors. The largest shareholders are fund manager Artemis, holding 11%, BlackRock at 7.7%, MFSC at 6.1% and Vanguard with 4.9%, as of April 2024. It is fairly transparent given the publicly available reporting.

Safety Considerations

IG is very profitable and well capitalised. Its listing on the LSE means the firm’s activities are subject to scrutiny and extensive financial documentation including its strategy. Unusually for a brokerage firm in the UK, IG has a rating by Fitch, which provides more insight into the financial stability. At BBB- (as of April 2024) Fitch’s assessment is just a notch away from High Yield.  The estimated probability of default is still low, as measured by 10-year peer cohort probability of default. Based on historical data, 3 out of 100 similarly rated financial companies went out of business over a 10-year period. This estimate would increase to around 6 out of 100 should it be downgraded to HY.

Regulation & Investor Compensation Schemes

The Financial Services Compensation Scheme protects up to £85,000 per institution in event of firm failure.  Importantly this is per customer per institution. 

Share & Cash Custodians

Client money and assets are held separately from IG’s own, in accordance with FCA CASS (Client Assets Sourcebook) rule. Cash is held in deposit accounts or qualifying money market funds.

Reputation

IG’s brand is built around CFD trading. They are undoubtedly a huge name in this area, but their share dealing, ISA and SIPP products are not well known in comparison. IG has offered trading products deemed by regulators too risky for retail clients and subsequently been forced by the European Securities and Markets Authority to discontinue their use – for example ESMA banned the sale of Binary Options in 2018, which IG offered on its trading platform. There is no history of regulatory intervention on the pensions and ISA side of the business, but as we’ve seen so far this is a very small percentage of their overall revenue. Although not named or singled out, IG does not pay interest on the cash held in client accounts, but still received £80.8m in revenue from the interest generated by customer cash in 2023. In December 2023 the FCA noted in a Dear CEO Letter that this while not illegal, it is poor practice because it is: not disclosed in a way that facilitates consumer understanding…as such does not equip them to make decisions that are effective, timely and properly informed”.

II. Fee structure

IG is a mixed bag in terms of fees, and not the most cost-effective platform for wise investors. Trading fees are relatively high but custody fees are waived if investors trade three times a quarter. FX fees are below that of most UK brokers, but SIPP costs are prohibitively high. 

Platform fees

IG charges are as follow:

  • Share Dealing and Stocks and Shares ISA Accounts – flat custody fee of £24 per quarter for Share Dealing and Stocks and Shares ISA accounts. This fee is waived if 3 or more trades are placed per quarter. 
  • SIPP Accounts – annual administration fee of £210, paid to third party “Options Pensions”, a company IG has contracted to manage its pensions products.

IG’s Smart Portfolio is a robo-investing service charging 0.50% as a management fee capped at £250 per year, plus 0.09% in transaction fees. In a SIPP this would be an addition to the £210 annual administration fees. Smart Portfolios are managed free of charge once they exceed £50,000 in size, which means that the cost to the investor will fall as their assets grow over this threshold.

Trading Commisions

IG charges £8.00 commission on trades across its accounts. This is reduced to £3.00 per trade if the account (ISA, GIA, SIPP) has traded more than 3 times in the previous calendar month. Their smart portfolio products have a 0.09% transaction fee.

Overall Fee Simulation vs Competitors

Most of our readers have simple Index portfolios. Using our Broker Total cost calculator, you can estimate the total cost of holding ETFs throughout the investment period. For our simulated scenarios:

  • General Accounts – IG comes out as competitive.
  • ISAs – IG comes out as competitive.
  • SIPPs – IG is not competitive.
We compared it against other Tier 1 Brokers with a good financial record and international offer.

Fee Simulation For General and ISAs

We can see that IG is the average option of the trio at £1,824. Interactive investor comes in as the most expensive at £2,878 and Interactive Brokers is the less expensive than both at £647. For IG the calculator assumes that you do at least three transaction a quarter and therefore that custody fees are waived. 

Investor assumptions

Model FeatureAssumption
InvestorUK
InstrumentUCITS ETF
AccountGeneral / ISA
Initial Investment£ 100,000
Monthly£ 1,000
Time Horizon20 years
Gross Return8%

Total Fees

Fee Simulation For SIPPs

IG’s SIPP fees are extremely high and should serve as a strong deterrent to any rational long-term investor. At £7,944 in cumulative costs over the 20 years IG would have to be providing a truly incredible service to compensate for the difference in costs versus their competitors and our review hasn’t found that to be the case. The SIPP administration fees render this product uncompetitive, at over double the £3,118 charged by interactive investor and over twelve times as expensive as Interactive Broker’s fee of just £647.

Investor assumptions

Model FeatureAssumption
InvestorUK
InstrumentUCITS ETF
AccountSIPP
Initial Investment£ 100,000
Monthly£ 1,000
Time Horizon20 years
Gross Return8%

Total Fees

Currency Exchange fees

IG aims to find the best available conversion rate for FX, then adds a 0.5% fixed fee to the transaction, which is below most traditional UK brokers, but not very competitive compared to leaders like IBKR.

Other fees

Deposits and withdrawal are free of charge.

III. Platform & Features

IG offers lots of features for traders. This is all very interesting, but for long term investors it is at best background noise and at worse a serious distraction. For wise investors, what would be good to get is automated investing, cash remuneration or family accounts. Advanced investors will find a lot of products, though.

Account Opening Process

We found opening an account to be straightforward, requiring only personal details and UK national insurance number.

account Features

IG’s platform, like its activities, are oriented towards those who trade frequently and want as many tools and as much information as possible to assist them in doing so. Side panels on the account homepage (GIA, ISA, SIPP) provide you with incoming financial discussions on social media via X/Twitter content and the option of watching IG’s internal video news service. You can quickly access dropdown lists of prices in commodities and equities indices, upcoming economic announcements and create watchlists based on sectors or other screening criteria. Selecting a security or market opens yet more financial information in the form of candlestick graphs and constantly changing spot prices. 

For long term investors, IG is notable for the features it does not provide to customers: 

  • No Cash Accounts: IG does not have any in-house cash savings products like Hargreaves Lansdown Active Savings or AJBell Cash Savings Hub. 
  • No Regular Investing Service. As of May 2024, IG does not provide a set and forget monthly investing service, something that the best UK brokers have provided for investment accounts for many years. You can set limit orders and stop losses on positions as a basic risk management technique. 
  • No Junior/Family Accounts. 

However, it offers the following: 

  • Share Transfer in and out, which is the standard for Tier 1 Brokers.
  • Smart Constructed Portfolios. IG does not construct and sell funds of its own, but it does have a Smart Portfolio product in both ISA and SIPP. This is a robo-investing service provided in collaboration with BlackRock, exclusively using iShares ETFs, with portfolio style based upon a survey of your own subjective risk tolerance profile. 

Internalisation and PFOF

IG is subject to UK FCA regulation banning the use of PFOF.

Cash Interest

IG does not pay interest on cash held in client accounts.

Advanced Features

IG does not provide you with access to US based ETFs, although you can trade US listed shares. There is no facility to leverage your investments by taking on margin loans and options, futures, derivatives and FX are only available in IG trading accounts rather than ISA, SIPP or Share Dealing accounts. IG provides 2,000+ ETFs and you can take on commodity exposure via ETCs.

If you click on a tab dedicated to commodities or FX, IG will suggest learning about CFD trading, which as we’ve seen above is the source of most the firm’s revenue. This is a user interface designed for traders rather than equity portfolio management and it shows.

Features

Investment TypeAvailability
ETFs
Stocks
Bonds
Funds
Options
Derivative
Futures
CFDs
Forex
Crypto
Commodities✅ (Via ETCs)

IV. Taxes

Tax Wrappers

IG offers customers two tax wrappers.

  • ISA
  • SIPP

IG is unusual amongst UK stocks and shares ISA providers as they operate the accounts as flexible ISAs. Normally, the contributions towards the £20,000 annual ISA limit are measured in gross terms. Put £19,000 into your account and withdraw it in the same year and you will only have £1,0000 remaining in ISA allowance, even though your account has £0 in net contributions. By contrast, in a flex ISA in the same scenario, you would still have all £20,000 of the annual allowance remaining. This could be useful to some investors who anticipate selling securities and withdrawing cash occasionally, with the intention of still maxing out their annual ISA allowance later in the tax year.

Tax Reporting

Those using IG’s Smart Portfolio’s service and Share Dealing account will be sent annual consolidated tax certificates.  

Thank you for reading.
Good Luck and Keep’em* Rolling!

(* Wheels & Dividends)

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